SYDNEY, April 15 (Reuters) - A A$2.5 billion ($1.9 billion)...

SYDNEY, April 15 (Reuters) - A A$2.5 billion ($1.9 billion) buyout of Morgan Stanley-linked Australian property group Investa Office Fund (IOF) (IOF) by local rival DEXUS Property Group (DXS) failed on Friday when it received insufficient shareholder votes, the target said.

In a filing to the Australian Securities Exchange on Friday, IOF said a third property company, Cromwell Property Group (CMW), which bought a 9.8 percent stake in the target this week, voted against the deal ahead of a meeting scheduled for Friday.

"Combined with other proxy votes, it is now clear that whilst the DEXUS Proposal has been supported by the majority of IOF Unitholders, the proposal will not be passed by the required 75 percent majority of units voted," Investa said.

The result deals a blow to the Australian M&A market which has quietened in the first quarter of 2016 after recording its biggest year, by total dollar value, in four years in 2015.

It also sends a reminder that, even in cases where deals have been endorsed by the boards of both the prospective buyer and the target company, small shareholders can band together to stop them going ahead.

IOF had been studying ownership options since Morgan Stanley put the broader Investa Property group up for sale a year ago. Excluding the listed IOF, the group was sold to sovereign wealth fund China Investment Corp [CIC.UL] in July.

Cromwell bought its IOF stake after another minority shareholder, a separate entity called Investa Office Management, said it rejected the deal as undervaluing the company.

Morgan Stanley Investment Management (Singapore) owns 2.7 percent of IOF shares, according to Thomson Reuters data.

A DEXUS spokesman was not immediately available for comment. IOF shares were up 0.3 percent at A$4.08, just under Dexus's offer price of A$4.11, while the broader market was also up 0.2 percent. Dexus shares fell 0.9 percent.

($1 = 1.2992 Australian dollars)