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As markets recover asset management firms are likely to resume their quest for global clients and better investment capabilities, although divestitures will still account for most of the deals in the sector, according to the report by the Jefferies & Co () unit released on Monday.

"People feel that the worst is now past us. With the clouds parting and a bit of sunshine, groups are starting to again think more strategically," said Aaron Dorr, a managing director at Jefferies Putnam Lovell.

Buyers acquired full or partial interests in 73 asset managers during the first half of this year, down 33 percent from 109 in the same period last year, the report said.

Bank and insurance companies looking for capital to prop up their balance sheets were the most active sellers, accounting for 98 percent of the announced deal value.

Divestitures, such as Barclays Plc's () sale of its Barclays Global Investors unit to BlackRock Inc (), accounted for more than half of all transactions for the first time in five years.

Indeed, some divestitures driven by the need for capital such as American International Group Inc's () asset management business are still being negotiated.

Jefferies Putnam Lovell said sales of asset managers by financial institutions is likely to continue as many banks and insurers may conclude that asset management is not a core business for them.

Moreover, after big financial institutions deals such as Wells Fargo's () purchase of Wachovia, buyers are reviewing their overall businesses and deciding what to keep and what to sell.

Earlier this month, Lloyds (), which bought troubled mortgage lender HBOS last year, agreed to sell the bulk of its Insight Investment unit to Bank of New York Mellon ().

But more traditional catalysts for deal-making, such as product diversification, retiring owners and capital and distribution needs, look set to make a comeback as well, the report predicts.

Independent firms are likely to re-emerge as sellers begin testing the waters in late 2009 and into next year, while listed companies, with their most pressing issues behind them, may go shopping, the report said.

"There is a lot more focus on doing things now," Dorr said. "It means that more substantive and higher volume of deals coming to market and discussion taking place in the third and fourth quarter, which leads to announced deals picking up through next year."

(Reporting by Paritosh Bansal; Editing Bernard Orr)