2009 saw a steep decline in European financial services merger and acquisition (M&A) activity with values, excluding government led deals, hitting their lowest levels for six years, according to PricewaterhouseCoopers (PwC). By contrast the outlook for increased deal activity in 2010 is positive and the level of private sector activity is expected to increase significantly.
Nick Page, partner, PwC, said: “The level of deal activity in the European financial services market plummeted to a six-year low in 2009. However, a restructuring-led wave of deal activity has started to gather momentum across the financial services industry and the private sector is predicted to see a resurgence in M&A activity through 2010.”
According to PwC’s latest ‘European Financial Services M&A Insights’ report, just €80bn-worth of deals was announced during 2009, compared with €178bn for the whole of 2008 and €208bn in 2007. Government involvement cooled significantly throughout 2009 and with the exclusion of government activity, the figures would be just €41bn for 2009 compared with €70bn for all of 2008 and lower than the €45bn total in 2004.
Despite the absolute decline in the value of transactions, private sector deals accounted for a growing proportion of the total. Government-led transactions, declined to 24% of total deal value in the second half of 2009, compared with 58% for the first half. Cross-border activity as a proportion of private sector deals increased to 65% from 41% in 2008.
As industry restructuring gathers pace, M&A activity will begin to recover during 2010. Fifty-nine percent of deal professionals surveyed felt that financial institutions will be the most prominent bidders for financial services targets during 2010 and into 2011. Seventy-three percent of respondents expect appetite for large financial services deals to increase during the year, which represents a marked change in optimism from 2008 when only 42% gave a positive response to the same question.
Shaun McNamee, partner, PwC, said: “The lion’s share of deal activity will sit with the private sector during 2010. Many European governments have switched their focus from the targeted support of certain financial institutions to planning their exits from bank share holdings in the medium to long-term future. However, we believe it unlikely that large scale exits by European governments will materialise during 2010.”
Key themes for 2010 will also include:
- British banks back in the sights of foreign investors.
- Non-core disposals by banks to continue.
- Private equity primarily in niche areas.
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