PwC: European financial services M&A activity up by a third in Q2 2012
31/10/2012 17:12
Number of deals rises for first time in two years.
Research from PwC has found an increase in European financial services M&A activity during the second quarter of 2012. PwC's latest edition of Sharing Deal Insight showed that M&A activity increased by 31% to €12.7bn in Q2 2012 from €9.7bn in Q1 2012. This represents a near doubling of the comparable figure of €6.7bn recorded in the 2nd quarter of 2011. The number of transactions also rose for the first time in two years and includes a number of cross border strategic acquisitions. The total value of deals for the first half of 2012 was €22.4bn, a 36% improvement on the equivalent figure of €16.5bn from 2011.
A recovery in banking M&A saw the overall value and volume of European financial services deals improve during the second quarter of 2012. Although one major banking rescue (a €4.5bn transaction which saw the Spanish government acquire a 45% stake in Bankia) played a significant role, the quarter also saw some more encouraging signs of a recovery in deal activity.
Liakos M Theodorou, Head of Assurance & Advisory at PwC Cyprus said:
"The first increase in two years in the total number of deals is a more significant indicator of a recovery in financial services M&A than total deal value. The growing stream of domestic consolidation and bolt-on deals within the mid and lower end of the banking market, which has helped to spur the increase in volumes, looks set to continue. Further drivers for a continued pickup in activity include the gathering pressure for consolidation within many of Europe’s insurance and asset management sectors.
“Barring any significant financial market shocks, we expect the number and value of deals to improve during the second half of 2012, building on the second quarter’s growth. However, if the last two years have taught us anything, it is that deal confidence is easily damaged by economic, political and regulatory surprises. These are the factors that will determine how M&A develops during the second half of 2012 and beyond.”
The quarter also saw the announcement of two large strategic deals valued at more than €1bn. Both involve cross-border acquisitions with a focus on expansion: the €2.8bn acquisition of Denizbank of Turkey by Russia’s largest bank, Sberbank, and the announcement that the member-owned London Metal Exchange is to be sold to Hong Kong Exchanges & Clearing for €1.7bn.
The insurance sector also generated some significant transactions during the quarter with deals up 22% to €1.1bn from €0.9bn in the previous quarter. However, this value is less than half the value of insurance deals done in the same period of 2011 (€2.5bn).
The UK was the most active market, generating 48 deals compared with 33 in the first quarter of 2012. The UK was followed by Russia with 21 transactions (compared with 16 in the first quarter) of which 12 were banking related, Spain with 13 transactions (12 in the first quarter) and Italy with 12 (3 in the first quarter).
Liakos M Theodorou, said:
“Western European banks may find it increasingly difficult to identify bidders for large non-core banking disposals in Europe – as illustrated by Lloyds Banking Group’s protracted sale of 630 UK branches. Most Western European markets and segments are less attractive to buyers from outside Europe, and many domestic players lack the capital or current appetite to make major acquisitions.
“Even so, small and medium-sized domestic consolidation is likely to continue in Western Europe’s more fragmented markets, especially in Spain, Italy and Greece. Businesses coming up for sale in the better performing markets of Central & Eastern and South Eastern Europe will also continue to attract bidders from inside and outside Europe. Outside the largest deals, private equity firms will remain interested in acquiring distressed targets, businesses with low capital requirements and asset portfolios.”
Research from PwC has found an increase in European financial services M&A activity during the second quarter of 2012. PwC's latest edition of Sharing Deal Insight showed that M&A activity increased by 31% to €12.7bn in Q2 2012 from €9.7bn in Q1 2012. This represents a near doubling of the comparable figure of €6.7bn recorded in the 2nd quarter of 2011. The number of transactions also rose for the first time in two years and includes a number of cross border strategic acquisitions. The total value of deals for the first half of 2012 was €22.4bn, a 36% improvement on the equivalent figure of €16.5bn from 2011.
A recovery in banking M&A saw the overall value and volume of European financial services deals improve during the second quarter of 2012. Although one major banking rescue (a €4.5bn transaction which saw the Spanish government acquire a 45% stake in Bankia) played a significant role, the quarter also saw some more encouraging signs of a recovery in deal activity.
Liakos M Theodorou, Head of Assurance & Advisory at PwC Cyprus said:
"The first increase in two years in the total number of deals is a more significant indicator of a recovery in financial services M&A than total deal value. The growing stream of domestic consolidation and bolt-on deals within the mid and lower end of the banking market, which has helped to spur the increase in volumes, looks set to continue. Further drivers for a continued pickup in activity include the gathering pressure for consolidation within many of Europe’s insurance and asset management sectors.
“Barring any significant financial market shocks, we expect the number and value of deals to improve during the second half of 2012, building on the second quarter’s growth. However, if the last two years have taught us anything, it is that deal confidence is easily damaged by economic, political and regulatory surprises. These are the factors that will determine how M&A develops during the second half of 2012 and beyond.”
The quarter also saw the announcement of two large strategic deals valued at more than €1bn. Both involve cross-border acquisitions with a focus on expansion: the €2.8bn acquisition of Denizbank of Turkey by Russia’s largest bank, Sberbank, and the announcement that the member-owned London Metal Exchange is to be sold to Hong Kong Exchanges & Clearing for €1.7bn.
The insurance sector also generated some significant transactions during the quarter with deals up 22% to €1.1bn from €0.9bn in the previous quarter. However, this value is less than half the value of insurance deals done in the same period of 2011 (€2.5bn).
The UK was the most active market, generating 48 deals compared with 33 in the first quarter of 2012. The UK was followed by Russia with 21 transactions (compared with 16 in the first quarter) of which 12 were banking related, Spain with 13 transactions (12 in the first quarter) and Italy with 12 (3 in the first quarter).
Liakos M Theodorou, said:
“Western European banks may find it increasingly difficult to identify bidders for large non-core banking disposals in Europe – as illustrated by Lloyds Banking Group’s protracted sale of 630 UK branches. Most Western European markets and segments are less attractive to buyers from outside Europe, and many domestic players lack the capital or current appetite to make major acquisitions.
“Even so, small and medium-sized domestic consolidation is likely to continue in Western Europe’s more fragmented markets, especially in Spain, Italy and Greece. Businesses coming up for sale in the better performing markets of Central & Eastern and South Eastern Europe will also continue to attract bidders from inside and outside Europe. Outside the largest deals, private equity firms will remain interested in acquiring distressed targets, businesses with low capital requirements and asset portfolios.”
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