The hedge fund space has seen significant recent M&A activity.  Deals in late 2010 included Man Group’s purchase of GLG Partners; RBS Wealth Management’s acquisition of BlueBay Asset Management; the acquisition by Japanese financial services group ORIX of a majority stake in U.S. hedge fund platform Mariner; and Carlyle Group’s purchase of a controlling interest in Claren Road Asset Management.  Early indications suggest that 2011 will also be a robust year for hedge fund transactions.  On the surface, hedge fund M&A may be seen simply as bringing the maturing alternative investment industry into line with the broader financial services market, where consolidation has been a fact of life for years.  Deeper reflection, however, suggests that deal activity is being driven by the unique features of the hedge fund sector itself.  Some traditional financial services firms perceive a need to begin offering hedge fund investments to their clients, and buying a fund is a way to plug that product gap.  Or, a financial services firm that already offers some hedge fund products may wish to add a focus on a particular sector, and acquiring an existing fund that fits the bill may be preferable to starting a new fund from scratch.  Acquirers may also consider hedge fund acquisition opportunities particularly appealing in light of recent performance issues and their (perhaps temporary) depressing impact on firm value.  Industry dynamics may be especially compelling to sellers as well.  From the hedge fund manager’s perspective, selling an interest in the firm may spell relief from the volatility and financial stress of recent years.  A transaction also may give principals a welcome chance to diversify personal assets by monetizing a significant stake in their business; this motivation is perhaps coming increasingly to the fore as a generation of hedge fund founders begins to consider retirement.  Finally, a hedge fund manager may be attracted by the prospect of business support from the acquirer, which may take the form of enhanced marketing resources, introductions to prospective investors, assistance with the development of new products, capital for strategic expansion, bolstered compliance and legal functions, or opportunities for cost savings and synergies.  In a guest article, Scott C. Budlong, Eva Marie Carney, Thao H.V. Do, Eric M. O’Meara, William Q. Orbe and Kenneth E. Werner, all Partners at Richards Kibbe & Orbe LLP, examine key transaction structuring points in the acquisition of a majority interest in a hedge fund manager (the “Manager”).  The authors assume a cash deal in which the acquirer (the “Acquirer”) purchases from certain principals of the Manager (the “Selling Principals”) a majority equity interest in the Manager, with the Selling Principals retaining a minority stake.  As discussed in this article, there are at least six major themes at work in such a transaction: regulatory diligence; valuation; incentives and franchise protection; control rights; the parties’ ability to increase or reduce their holdings post-closing; and investor relations.  These themes are inter-related and a successful transaction must find common ground between the Acquirer and the Selling Principals on each one.