Asset managers are in for some deal-making as the sector tries to deal with the chinks exposed by the financial crisis, KBW analysts predict.

“Stressed capital markets have depressed profitability at most asset managers and brought to the fore many of the challenges that have been confronting the industry but were obscured by the bull market,” the analysts write in a report.

Some of the deal activity has already been playing out as divestitures by financial services companies, with negotiations ongoing for such units as AIG’s business and Bank of America’s Columbia.

KBW’s analysts predict most acquisitions are likely to be smaller transactions.

Possible buyers? Invesco, BlackRock, Bank of New York Mellon, Franklin Resources, Legg Mason, Affiliated Managers Group, Federated Investors, Blackstone, Fortress, GLG Partners and others have expressed a continued interest in acquisitions, they said.

Those hungry for larger deals could include Franklin and Bank of New York Mellon, the analysts said, adding that they see little likelihood of deals between publicly traded asset managers.