Merger and acquisition action in the global asset management industry was down sharply in the first quarter of 2010, but is expected to pick up in the year ahead, according to Jefferies & Co.’s Financial Institutions Group.

There were just 25 M&A deals in the asset management sector for the first quarter of 2010, compared with 38 announced transactions in the first quarter of 2009, the firm reports. However, it doesn’t expect the drought to last.

“The slack tide of the first quarter’s M&A activity will begin to flow again as improved markets bring both buyers and sellers back to the negotiating table. Alternative asset management businesses continue to be among the most sought after targets based on their expected future growth,” said Aaron Dorr, a New York-based managing director within Jefferies’ Financial Institutions Group.

Indeed, the firm says that over 50% of the first quarter’s transactions involved acquisitions of alternative managers. In Q1 2009, transactions involving alternative managers represented approximately 25% of the total deal volume.

Jefferies says that cross-border transactions are also on the up swing, representing 24% of all deals in the first quarter of 2010, up from 11% in the year-earlier period.

“While cross-border and alternative transactions are increasing, divestitures – the most prevalent theme in 2009 – are beginning to subside,” it says, adding that divestitures made up 44% of M&A activity in Q1 2010, down from 50% in the year-earlier period and 56% for full-year 2009.

IE