04.05.2007, 07:27
Deal Volume in European Financial Services Up 77%
OREANDA-NEWS. April 26, 2007. M&A deal values in Europe’s financial services sector increased by 77% over the previous year to reach ?137 billion, reports ‘Financial Services M&A: Going for growth in Europe’, the annual analysis of financial services M&A activity in Europe from PricewaterhouseCoopers LLP. Domestic transactions in 2006 also tripled in value over 2005 levels to reach approximately ?76 billion, reported the press-centre of PricewaterhouseCoopers.
The Banking sector was the most dynamic across Europe, with the total value of banking deals reaching almost ?99 billion in 2006. The insurance sector also experienced growth in the total value of deals during 2006, however M&A activity in asset management dropped substantially.
Nick Page, partner in the transaction services financial services group at PricewaterhouseCoopers LLP, said:
“The ongoing pressure for consolidation, led by the banking sector, is expected to continue. We also anticipate increased activity across emerging Europe as larger European players position themselves for growth, as well as a greater number of private equity backed deals throughout the European financial services industry.”
Leading European markets
Geographically, Italy was the most active European market in 2006, accounting for 48% of total activity. Eight of the top twenty European deals involved Italian targets, collectively worth ?62,7 billion—almost half of Europe’s M&A activity by value.
Although French targets accounted for the second largest total value of bids, the majority of activity was domestic in nature.
Activity in Germany declined steeply to just 1,7% of the total deals by value in 2006, compared with 28% last year.
Main trends
The ongoing drive to build national champions, particularly in Italy
European banks, and the French ones in particular, continue to develop second home markets in search of growth and for strategic positioning
Focused disposal of insurance assets by bancassurers
Interest from private equity houses continues although volumes are down
Sector Focus
Banking sector
The value of banking transactions more than doubled on 2005, representing 72% of the value of all financial deals
Fifteen of the year’s largest twenty deals involved banking targets
The recent and ongoing banking M&A is set to continue across emerging Europe, including in Turkey and Greece, although the rising deal prices may put pressure on some acquirers, possibly resulting in reversal of some acquisitions in due course
Europe is not considered to be the preferred market for US banks during the next 12–24 months
Insurance
M&A activity in the insurance sector reached ?25 billion, representing an increase of 34% on the previous year. Distribution will continue to represent a major area of interest
In the motor and personal lines market a period of hardening rates and anticipation of improving profits may also encourage increased investments and contribute to a period of interest by private equity in the non-life sector
Investment management
M&A volumes in the asset management sector dropped to less than ?2 billion in 2006 from more than ?7 billion in 2005
Despite continuing consolidation in the US investment management sector, European banks and insurers seem to be holding on to their asset management businesses as they can support groups’ P/E ratios and offer synergy potential in cross-border deals
Russian market
Michael Knoll, Head of M&A Lead Advisory, commented on the situation in Russia’s financial services sector:
“The Russian financial services industry was one of the most active sectors in terms of M&A activity in Russia, outpaced only by the energy&utilities and manufacturing sectors. The value of disclosed deals in the financial sector amounted to USD 7,3bn or 8,2% of the total deal value in Russia (up from 6,.9% in 2005). Moreover, the number of M&A transactions in the financial industry (225) almost doubled compared to 2005.
Foreign banks demonstrated a great interest in the Russian retail banking market, which led to a number of significant acquisitions by large European banks. Another trend was for large Russian banks to begin their expansion abroad with the acquisition of several medium-sized banks in the CIS region.
Major players in the Russian insurance market continued to acquire smaller companies and to expand into the regions of Russia. Foreign players were still hesitant as to M&A as a means for growth during 2006, but in the first quarter of 2007, strong interest in the market was demonstrated by two larger acquisitions. Besides, we expect regulatory changes also accelerate consolidation in the sector.”
The Banking sector was the most dynamic across Europe, with the total value of banking deals reaching almost ?99 billion in 2006. The insurance sector also experienced growth in the total value of deals during 2006, however M&A activity in asset management dropped substantially.
Nick Page, partner in the transaction services financial services group at PricewaterhouseCoopers LLP, said:
“The ongoing pressure for consolidation, led by the banking sector, is expected to continue. We also anticipate increased activity across emerging Europe as larger European players position themselves for growth, as well as a greater number of private equity backed deals throughout the European financial services industry.”
Leading European markets
Geographically, Italy was the most active European market in 2006, accounting for 48% of total activity. Eight of the top twenty European deals involved Italian targets, collectively worth ?62,7 billion—almost half of Europe’s M&A activity by value.
Although French targets accounted for the second largest total value of bids, the majority of activity was domestic in nature.
Activity in Germany declined steeply to just 1,7% of the total deals by value in 2006, compared with 28% last year.
Main trends
The ongoing drive to build national champions, particularly in Italy
European banks, and the French ones in particular, continue to develop second home markets in search of growth and for strategic positioning
Focused disposal of insurance assets by bancassurers
Interest from private equity houses continues although volumes are down
Sector Focus
Banking sector
The value of banking transactions more than doubled on 2005, representing 72% of the value of all financial deals
Fifteen of the year’s largest twenty deals involved banking targets
The recent and ongoing banking M&A is set to continue across emerging Europe, including in Turkey and Greece, although the rising deal prices may put pressure on some acquirers, possibly resulting in reversal of some acquisitions in due course
Europe is not considered to be the preferred market for US banks during the next 12–24 months
Insurance
M&A activity in the insurance sector reached ?25 billion, representing an increase of 34% on the previous year. Distribution will continue to represent a major area of interest
In the motor and personal lines market a period of hardening rates and anticipation of improving profits may also encourage increased investments and contribute to a period of interest by private equity in the non-life sector
Investment management
M&A volumes in the asset management sector dropped to less than ?2 billion in 2006 from more than ?7 billion in 2005
Despite continuing consolidation in the US investment management sector, European banks and insurers seem to be holding on to their asset management businesses as they can support groups’ P/E ratios and offer synergy potential in cross-border deals
Russian market
Michael Knoll, Head of M&A Lead Advisory, commented on the situation in Russia’s financial services sector:
“The Russian financial services industry was one of the most active sectors in terms of M&A activity in Russia, outpaced only by the energy&utilities and manufacturing sectors. The value of disclosed deals in the financial sector amounted to USD 7,3bn or 8,2% of the total deal value in Russia (up from 6,.9% in 2005). Moreover, the number of M&A transactions in the financial industry (225) almost doubled compared to 2005.
Foreign banks demonstrated a great interest in the Russian retail banking market, which led to a number of significant acquisitions by large European banks. Another trend was for large Russian banks to begin their expansion abroad with the acquisition of several medium-sized banks in the CIS region.
Major players in the Russian insurance market continued to acquire smaller companies and to expand into the regions of Russia. Foreign players were still hesitant as to M&A as a means for growth during 2006, but in the first quarter of 2007, strong interest in the market was demonstrated by two larger acquisitions. Besides, we expect regulatory changes also accelerate consolidation in the sector.”
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