The global financial meltdown is keeping asset management investment bankers busy as sales by distressed institutions help keep the deal flow going, according to latest data from Jefferies Putnam Lovell.

While dealmaking in general has lately been in a swoon, asset manager transactions increased 33 percent to 69 deals worldwide in the third quarter, preliminary data shows.

Total assets under management that changed hands rose to $1 trillion, more than three times the $300 billion in the third quarter of 2007, it said. Total disclosed deal value increased to $6.4 billion from $6.1 billion a year earlier.

These include deals such as the sale of Lehman Brothers fund units, including Neuberger Berman, to Bain Capital and Hellman & Friedman.

“In the short-term, we expect more banks and other cash-strapped financial institutions to retreat from owning money managers,” said Aaron Dorr, a managing director at Jefferies Putnam Lovell.

Private equity funds are expected to raise their role in the industry in general as consolidation among hedge fund companies increases, the firm said.

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Banks aren’t lending to each other, but they are buying each other. An interesting by-product of the deals: capital-hungry institutions are raising billions of dollars of fresh capital in a tumbling market.
 
Bank of America said yesterday its tier-one capital ratio would be 7.5 percent in the third quarter, down from 8.25 percent in the second quarter, spurring it to launch a $10 billion share offering and cut its dividend. On a conference call, it said it could raise even more to help manage the purchase of Merrill Lynch. Wells Fargo planned to raise $20 billion to fund its bid for Wachovia, while rival suitor Citigroup aimed to raise $10 billion to buy that bank. Those two are taking a three-day break from a legal battle over who gets what.  
 
If Citigroup loses out on Wachovia, Dan Wilchins points out, it will also miss out on a great chance to raise capital. Citi would likely have a much easier time raising capital to fund its growth than to patch holes on its balance sheet. The bank has raised $50 billion of capital in the last seven months, and its management has consistently said that it has raised more than it expected to need, he reports. But that could all change in a recession, as credit cards, investment banking, and retail brokerage businesses lose customers. 
 
Once the dust settles, ruthlessly diluting shareholders may show itself to have been absolutely necessary, and perhaps even unavoidable. But now with the markets in freefall, it’s more than a little scary. 

Deals of the day:

* Singapore state investor Temasek Holdings kicked off the sale of electricity generator PowerSeraya, in a deal that could fetch around $2.5 billion. To read more, please double click on 

* Icelandic investment firm Exista will sell its near 20 percent stake in Finnish insurer Sampo to reduce liabilities but will keep its other assets, the group said in a statement.

* Commonwealth Bank of Australia said it has started exclusive talks with British bank HBOS about a potential takeover of BankWest, HBOS’ Australian operation, estimated to be worth A$2 billion ($1.45 billion).

* British military consumables maker Chemring Group is buying a U.S. mine-detection systems company for an initial $30 million, to boost its explosive ordnance disposal (EOD) business.

* Fletcher Building , New Zealand’s largest building products and construction company, said it would buy steel products company Fielders Australia Pty Ltd.

* Japanese apparel maker Renown said it may sell British clothier Aquascutum as part of restructuring that could also include it selling its offices and a distribution centre in its home country. Shares in Renown fell more than 16 percent after a local newspaper reported that the company would sell 155-year-old British raincoat maker Aquascutum by February.

* Royal Caribbean Cruises said it has agreed to sell its 50 percent stake in Island Cruises to a unit of British-based tour operator TUI Travel, which owns the other half.

* Wireless technology group Wavecom branded an unsolicited offer by Gemalto as hostile and said it undervalued the company. 

* South Korea’s Hanwha Group is considering selling 20 percent of its life insurance unit to fund its possible purchase of Daewoo Shipbuilding & Marine Engineering, a source close to the company said.

* Malaysia’s Maybank has been offered another 15 percent stake in Bank Internasional Indonesia at a discount to its original offer price that will cut the total price by more than 200 million ringgit ($57.39 million).

The taxman is bringing good tidings for U.S. companies this crisis season.

Last week, the IRS relaxed rules at least twice in a bid to help companies access much-needed capital.

Early last week, it made bank takeovers easier by allowing a buyer to take tax breaks on a target’s loan losses immediately instead of having to spread it over many years.

Experts said that could spur deals in the troubled banking sector and may have been one of the reasons behind Wells Fargo’s surprise bid for Wachovia.

The IRS then relaxed another rule, allowing U.S. companies to borrow from their foreign subsidiaries without triggering a 35 percent corporate income tax. That move is aimed at bringing fresh capital into the system.

Of course, the generosity comes at a cost. Stifel Nicolaus analysts estimated that thanks to the tax breaks, the competing bids by Citigroup and Wells Fargo for Wachovia will cost the government the same amount of money — $21 billion.

(Photo credit: Reuters)