IM Deals Commentary–Morgan Stanley/FrontPoint Spinoff

August 2, 2010

CNBC.com reported today that Morgan Stanley is planning to spin off hedge fund unit FrontPoint Partners.  Will this be the start of a wave of divestitures in reaction to restrictions in the Dodd-Frank Act?

CNBC.com reported on August 2, 2010 that Morgan Stanley is planning to spin off hedge fund unit FrontPoint Partners (which it acquired only four years ago) and that the transaction could take place in about three months according to sources familiar with the situation.  This seems likely to become a recurring theme for the major banks, which must now develop plans to comply with Dodd-Frank Act restrictions on capital invested in private equity funds and hedge funds.  How these divestitures will be structured will likely vary based on the profile of each bank’s relevant operations and could be significantly impacted by forthcoming regulations which will implement the financial reform law.  What ownership interests or other relationships the banks will retain in these operations after the divestitures will be worth watching, as will the valuations placed on these businesses and the source of financing for these transactions.

Jim Abbott / Craig Sklar


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