Financial Services Deals Up 55% as Bank and Private Equity Activity Grows

According to the forthcoming ‘European Financial Services M&A Insight’ report due to be published by PricewaterhouseCooopers (PwC), deal activity in the financial services sector is showing signs of recovery as bank restructuring continues to accelerate and private equity firms start to play a bigger role in the sector again for the first time since the economic crisis. Key findings in the report include:

• Overall value of deals is up 55% from the previous quarter as bank restructuring continues to drive activity.
• Continuing rebound in private equity activity.
• Cross-border deals are worth more than domestic for the first time this year suggesting buyers are now becoming more focused on growth.

Bank restructuring remains the central driver of financial services deal activity, accounting for €13bn of deals in 3Q10, up from €6bn in the previous quarter. This increase in activity aided an overall surge in deal values across the sector to €17bn in 3Q10, a 55% rise from the previous quarter, and the highest value seen since the second quarter of 2009.

Nick Page, partner, PwC, said: “After a subdued second quarter, the long awaited M&A [mergers and acquisitions] recovery is starting to take place. As expected, bank restructuring is still the main driver of activity in the sector as many continue to dispose of non-core assets and branch networks. However, we are starting to see a rise in cross-border activity suggesting buyers are becoming more focused on growth and not just domestic targets.”

The predicted pick-up in private equity deal-making in the financial services sector is also seen coming to fruition in 3Q10. Private equity deals made up 19% of overall deal values for the period at €3.3bn. In some areas private equity investors are natural bidders for assets that banks have identified as non-core, and as a result we expect this trend to continue into 2011.

Fredrik Johansson, director, PwC, said: “Predictions of more private equity deal activity in the financial services sector has long been talked about, but we have started to see real signs of action in the third quarter. Private equity is becoming a much bigger buy side participant in the financial services M&A market and we expect this interest to only continue on the back of restructuring opportunities.”

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