As institutions strive to make the most efficient use of limited finance, the key consideration is which businesses to expand and which to scale back.
One clear trend is the renaissance of classic banking as unsustainable and over-leveraged structures give way to simpler and more transparent forms of business. This includes moving away from an originate-to-distribute model towards a renewed focus on credit quality and relationship-driven banking. The ability to build enduring relationships through customer service and understanding and the ability to adapt to tougher regulatory controls will be key competitive differentiators in this environment.
Effective restructuring will help to streamline what are often overly complex and diffuse banking groups. In turn, divestment will provide well-capitalised companies with openings for opportunistic acquisition. However, these windows of opportunity are a reflection of a highly dislocated market and may therefore be limited. Acquirers should also be wary of over-leveraging their purchases, which the nervous markets have shown will not be accepted.
Giving you the edge
PwC has a dedicated global network of financial services transaction and business development specialists who can help banking and capital market organisations to make the most of opportunities for restructuring and growth. This includes:
- Preparing lists of suitable targets, both for sale and for purchase
- Carrying out realistic valuation and rigorous due diligence that reflect the heightened risk and uncertainty in the current market climate
- Developing a clear and compelling rationale for capital raising
- Ensuring value realisation through effective post-merger integration
- Identifying the most profitable customers and focusing on the business that will reap the best returns on investment in customer acquisition and retention
- Ensuring that the business model takes full account of customers’ needs, tax, financial and regulatory considerations and the organisation’s capacity to change the way it does business
- Using new technology to develop cost effective distribution and delivery