Recent years have been marked by a surge in
private equity investment in financial services. Groundbreaking deals include the acquisition and restructuring of a number of closed life insurance funds. The growing level of interest is evident from the PricewaterhouseCoopers UK M&A deal confidence survey 2005. More than 60% of corporate buyers expected increased competition from financial buyers and a third felt that the leverage used by PE investors makes it difficult to compete in auctions. While the investment trend is set to continue, the high levels of regulation and capital constraint within the financial services sector will remain a consideration for PE firms.
While deal volumes have been relatively low within asset management as a whole, increasing competition and margin pressures could lead to a renewed wave of M&A, as companies seek to concentrate on their core strengths and divest less critical or well-performing areas. Acquisition and joint ventures within the hedge fund sector also look set to increase as larger asset management groups seek to secure high margin capacity in the increasingly deregulated
hedge fund sector.
Smart targeting, skilful execution and effective implementation will be critical in ensuring the success of any deals and winning the support of analysts and investors, who will rapidly penalise any perceived failure to deliver value from M&A. Merged companies’ ability to deliver value is likely to come under more intense scrutiny following the move to International Financial Reporting Standards (IFRS).
How PwC can help you
PricewaterhouseCoopers has a global network of specialists who can help vendors and acquirers to maximise the returns on deals and reduce the risks. Services include due diligence, merger benefit analysis, finance, transaction and post-integration support.
