Madison Street Capital, a leading investment banking firm, released its much awaited report of M&A transaction activity. According to the report, 42 M&A deals were closed in 2015, which is far better than 32 transactions, in the previous year. The AUM transaction volume was also 27 percent higher than 2014 indicating investor confidence in M&A activities. Interestingly, the report also cited a wave of transactions in the fourth quarter of 2015, which is a potential sign of more M&A deals in 2016. In fact, if the trend in the last few quarters continue, it is likely that 2016 will be a record year for the industry.
Despite large number of deals, the performance of hedge fund strategies are mediocre. As a result, institutional investors are looking towards alternate investment strategies to achieve higher returns. The impact of the decreased performance is felt across the board as small hedge fund managers are struggling to attract new capital. It also means that the capital flow is directed towards larger hedge funds. Overall, the entire hedge fund industry is incurring high operational costs and downward pressure on fees. Accordingly, the strict dynamics of hedge funds is forcing managers to consider a variety of strategic investment activities.
According to the Senior Managing Director of Madison Street Capital, Karl D’Cunha, hedge fund managers are trying to cope with the industry dynamics by using a variety of deal mechanisms to attract sellers and buyers. Unlike the previous years, traditional M&A methods are structured as deals and incubators. Likewise, revenue-share stakes, PE stakes and PE bolt-on are becoming a priority. Karl also indicated that the industry will also see a number of opportunistic partnerships to increase revenues. As such, these partnerships are formed to bridge distribution to product offerings.
About Madison Street Capital
The latest research is the 4th edition of the original M&A industry report by Madison Street Capital. The firm is one of the leading international investment banking firms offering strategic and financial advisory to hundreds of high-profile clients across the globe. A team of highly skilled hedge fund and asset managers are available to discuss a range of strategies regarding capital introduction, portfolio valuation, financial restructuring, and financial sponsor coverage.