Merger and acquisition activity in the global asset-management industry was down in the first half of 2009, but is set to pick up in the second half of the year, according to Jefferies Putnam Lovell, the financial industry division of New York-based investment bank Jefferies & Co., Inc.

During the first half of the year, there were 72 announced transactions in the investment-management industry, down from 109 in the first half of 2008. Deal volume in the second quarter totalled 35, down from 52 a year earlier.

That said, the massive BlackRock purchase of Barclays Global Investors drove up total deal value from the previous year. The June deal marked the second-largest deal ever in terms of value, at $13.5 billion. It helped boost the total deal value to $14.1 billion in the first half of 2009, up from $7.7 billion in 2008. For the quarter, total deal value jumped to $13.7 billion from $2.3 billion a year earlier.

The BlackRock acquisition also marked the largest ever deal in terms of assets under management, at $1.5 trillion. As a result, managed assets transacted surged to $2.3 trillion in the first half of the year, and to $1.7 trillion in the second quarter, up from $588 billion in the first half of 2008 and $227 billion in the second quarter of 2008.

However, most M&A activity during the first half of 2009 involved much smaller deals. The median deal size during the period was under $1 billion of AUM transacted, marking the first time since the 1990s that the median transaction size fell below $1 billion for a six-month period.

Other major transactions during the quarter included Aquiline Capital Partners’ acquisition of Conning & Co.; JPMorgan Chase’s acquisition of an undisclosed remainder of majority-owned subsidiary Highbridge Capital Management; and Woori Finance’s purchase of Credit Suisse’s 30% interest in joint-venture Woori Credit Suisse Asset Management.

Divestitures represented 47% of the deals announced in the first half of 2009 and included three of the five largest transactions by AUM, as larger financial institutions worked to shore up their capital base. This is a substantial increase from the first half of 2008, when divestitures represented 26% of the deals announced.

“We expect divestitures to remain the driving force in M&A activity through the second half of the year as the asset management industry faces its most radical reshaping on record,” said Aaron Dorr, New York-based managing director at Jefferies Putnam Lovell.

But cross-border deals fell sharply to 18% of the total from 33% in the first-half 2008, as cautious buyers displayed reluctance to search for targets outside of familiar home markets without stronger indications of a recovery setting in, according to Jefferies Putnam Lovell.

Transactions involving alternative investment managers, while down from the year-earlier period, still represented 28% of the total, against 37% in the first half of 2008.

In the second half of 2009, Jefferies Putnam Lovell expects a high level of activity from pure-play asset managers seeking to add scale, fill product gaps, add talent and expand product offerings at attractive prices. In addition, private equity firms will be drawn to the industry’s growth and profit potential and low capital requirements, which will drive up M&A activity.