Merger & acquisition activity in the US financial services sector will gain momentum in 2010 as industry conditions continue to improve and the outlook for regulatory reform gains clarity, according to PricewaterhouseCoopers.
Selected excerpts from On the Road Again – Transactions in an Opportunistic Market,
Deal-making in the remainder of 2010 will be marked by a steady stream of FDIC-assisted M&A deals in the banking sector, continued consolidation among small- to mid-size asset management firms, and an uptick of deals in the property and casualty (P&C) insurance segment.
Although year-to-date transaction volume has been modest, PricewaterhouseCoopers expects activity to increase over the remainder of 2010. Improving sector fundamentals will reduce the gap between buyer-seller pricing expectations and uncertainty surrounding regulatory reform is likely to be clear. These factors will enable the potential impact of prospective reforms to be priced into term sheets.
We believe the current market presents a significant number of potential opportunities in the banking, asset management and insurance sectors for investors that have the liquidity and capital strength to be acquisitive and the infrastructure and capabilities to realize potential synergies - Gary Tillett, PricewaterhouseCoopers
- Banking. Continued high credit losses, weak asset generation, and a reduction in the availability of cheap liquidity will make it difficult for banks to return to historical levels of profitability and growth.
- Asset management. Asset managers are likely to benefit from increased savings rates. Individual investors, however, remain averse to the market volatility that significantly impacted their savings and retirement accounts.
- Insurance. Insurance companies achieved improved performance in 2009 driven by the recovery in asset values; however, continued soft pricing in property and casualty insurance and a shift to safer products for life insurance may mean lower profits in the near future.
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