Private Sector M&A Deals Show Positive Trend Despite Falling Values

While deal values in the financial services sector dropped off in the final quarter of last year, PricewaterhouseCoopers (PwC) experts believe that this decline will not change the positive trend of increasing merger and acquisition (M&A) activity.

Pre-released figures from PwC’s Sharing Deal Insight report, which examines deals across the European financial services sector and is due to be published later this month, show that during 2010 deal values across the sector fell to €52bn from €80bn in 2009. The fourth quarter of last year showed a marked deceleration in activity, with a value of €9.5bn – a 55% decline on the €21.3bn recorded in the previous quarter. A slowdown in reported banking deals and sales of equity stakes was the single largest factor behind the decrease in disclosed deal values in 4Q10.

Nick Page, partner at PwC, said: “Last year’s deals only reached just over half the value recorded in 2009 but the gathering of momentum in private sector activity, driven primarily by bank restructuring is cause for optimism. Deal values in 2009 were largely supported by government-led activity and a couple of big transactions. As banks continue to investigate options for their non-core assets, activity is likely to gather pace.”

Overall banking deals fell from €49bn in 2009 to €30bn in 2010, but the high level of government-led transactions in 2009 makes comparison misleading. With government activity removed, banking deals grew from €11bn in 2009 to €26bn last year. Insurance deal values dipped slightly to €10bn in 2010 from €12bn in 2009, while asset management deals fell from €15bn (a figure buoyed by the €10bn acquisition of BGI) to a more modest €8bn.

Fredrik Johansson, director at PwC, said: “We believe there will be three principal factors that influence M&A in European financial services this year. A search for growth will stimulate cross-border deals, we’ll see restructuring in banking and asset management in response to regulation and there will be a greater prominence of private equity as investors in the sector. Private equity firms were bidders in three of last year’s top 20 deals and their role is becoming increasingly influential.”


Related reading

New consumer banking head for Citi Asia Pacific