It seems like 2016 is going to be an exciting year in terms of hedge fund merger and acquisition transactions. In fact, Madison Street Capital predicts that it may even be record-breaking. There are several key drivers that are helping position the year 2016 to be better than any other year.
Recently, Madison Street Capital released their 4th edition of an overview that looks at transaction activity and new opportunities with merger and acquisitions. The statistics the report reveals give reason to believe that things are looking good for M&A transactions. The numbers are definitely up. The report mentioned that there were 42 hedge fund deals that took place in 2015. This was 10 more transactions that took place than in the year 2014. When transaction volume was measured by AUM, they noticed that it was more than 27 percent higher in the year 2015 than in 2014. Another significant part of the report pointed out that many of the transactions that took place in 2015 happened in of the fourth quarter.
The Senior Managing Director at Madison Street Capital, Karl D’Cunha, has mentioned that the hedge fund industry is highly fragmented and only mediocre performance was seen in most hedge fund strategies in 2015. However, there are a lot of factors that are working together to improve the situation. First, the industry is continuing to see consolidation, particularly in opportunistic partnerships. Second, hedge fund industry assets are higher than they ever have been even though the strategies that were used in 2015 were not outstanding.
There are several reasons why hedge fund managers are looking at strategic alternatives. Many institutional investors are looking at ways to diversify and allocate some of their funds in the alternative asset management sector. They are experiencing rising liabilities and need to achieve higher returns in order to match them. Even smaller hedge fund managers are having a difficult time attracting new capital, and so their operations are below best case scenario portfolio capacity levels. Madison Street Capital is seeing more and more deal mechanisms being used in a structural way to help buyers and sellers. In addition to traditional merger and acquisitions, other transactions are being structured as PE stakes, revenue share stakes, incubator deals, and more. They felt that 2015 was a strong year in the hedge fund industry and that 2016 will be even better.
They primarily provide financial advisory services. They are not a lending institution. Some of their services include business valuation services, financial opinion services, valuation and merger and acquisition services for hedge funds, and restructuring services.