Financial services mergers & acquisitions will face both uncertainty and opportunities in 2013 due to increased regulatory costs, depressed organic growth, and the greater availability of attractive financing, according to a new report issued by PwC US.
However, while 2012 proved to be a challenging year for announced deal activity in the financial services sector, there is some cause for optimism in 2013.
Announced transactions rose from 756 in 2011 to 768 in 2012, but deal value fell from $72.1 billion in 2011 to $62.4 billion in 2012, according to the report. However, 2012 featured the return of private equity to the financial services M&A sector a la the Carlyle Group’s acquisition of TCW Group, a trend that should continue into 2013. PE-backed announced transactions rose 73% from 40 in 2011 to 69 in 2012.
The report also revealed that asset management deal values in 2012 far exceeded 2011, even after excluding mega deals carried out in both years, and in spite of the fact that deal volume fell 27%. Medium sized disclosed deals increased, signaling recovery in the sector.
“2013 is expected to feature a moderate resurgence in the number of deals involving small to medium sized independent managers as values improve. Traditionally, these deals have driven volume in the sector,” according to the report.
“Divestiture activities from European and U.S. banks, as well as insurance companies, should continue in response to regulatory pressures. PE interest in the sector has also remained strong.”