The FINANCIAL — Global financial services transaction activity is gaining momentum, with 46% of executives intending to pursue acquisitions in the next 12 months, according to EY’s 12th Financial Services Capital Confidence Barometer.
EY’s Capital Confidence Barometer is a biannual survey of more than 1,600 senior executives from large companies around the world and across industry sectors. Of the senior executives surveyed, 154 were from the banking and capital markets, insurance, and wealth and asset management sectors.
Global banking and capital markets activity to drive financial services M&A in 2015
Global banking and capital markets transaction activity is gaining considerable momentum, with 52% of executives intending to pursue acquisitions in the next 12 months, compared to 29% at the same time in 2014.
The level of activity in banking and capital markets exceeds the financial services sector as a whole, where 46% of executives expect to pursue acquisitions in the next 12 months. The view of the global economy is one reason for the increased interest in M&A, as 80% of banking executives feel optimistic, compared to 70% six months ago. Seventy-eight percent also expressed confidence in corporate earnings.
David Barker, EY Transaction Advisory Services Leader for Global Banking & Capital Markets, says:
“An increase in the number and quality of opportunities, and an increased likelihood that deals will close is bolstering confidence. Compressed interest-rate margins and regulatory capital pressure may result in further industry consolidation and asset sales, while the need to keep pace with innovation is fueling acquisition. With an upswing in M&A activity in 2014, we expect a strong market to continue through 2015.”
Sixty-five percent of banking executives said they will focus M&A strategies on cross-border deals in their immediate region, compared to 15% focusing on domestic deals and 20% on global transactions. The United Kingdom, India, Germany, Russia and South Africa are the top investment destinations for banking in 2015.
With banks needing to take advantage of new technologies to remain competitive, 59% of M&A activity will be in the form of innovative investment that could shift the scope of their business, such as entering another industry sector. Sixty-five percent of M&A activity across all financial services sectors will be in the form of innovative investment.
Insurers overwhelmingly look toward global deals
Insurance executives are taking a global approach to M&A in 2015, with 61% focusing their M&A strategy on global deals in 2015, compared to 27% across all financial services sectors.
Thirty-nine percent of insurers intend to pursue acquisitions in the next 12 months either domestically, within their immediate region or globally. The United Kingdom, China, Australia, the United States and Japan are the top investment destinations for insurers.
David Lambert, EY Transaction Advisory Services Leader for Global Insurance, says:
“The current economic environment makes acquisitions an attractive option. The anticipation of Solvency II is requiring insurance companies to improve the overall structure of their operations and balance sheets. Meanwhile, reinsurers face pressure to enhance value for investors, leading executives to turn their eyes toward M&A.”
Insurers are feeling more optimistic about the global economy, with 79% expressing a positive outlook, compared to 65% six months ago. Seventy percent have confidence in corporate earnings, compared to 75% across all financial services sectors.
With insurers looking to enhance their operational efficiency, meet new regulatory requirements and remain competitive, 85% of M&A activity will be in the form of innovative investment.
Half of wealth and asset managers expect M&A pipeline to increase
While 22% of wealth and asset management executives intend to pursue deals in the next 12 months, 50% expect their M&A pipeline to increase, compared to financial services industry averages of 46% and 58%, respectively.
Half of all wealth and asset management executives are focusing their M&A strategies on cross-border deals in their immediate region, with the other half focusing domestically. The United Kingdom, United States, Thailand, Switzerland and Malaysia are the top investment destinations.
Nadine Mirchandani, EY Transaction Advisory Services Leader for Global Wealth & Asset Management, says:
“With global markets and asset classes in different economic cycles, investors expect asset managers to access investment returns wherever the opportunity exists. As optimism about the global economy increases and attracting changing global wealth to achieve scale becomes increasingly important, we can expect more wealth and asset managers to consider transactions as an option.”
Sixty-seven percent of wealth and asset management executives feel optimistic about the global economy, an increase from 55% six months ago. That figure compares to 78% across all financial services sectors.
Innovation will be a focus of wealth and asset managers, with 75% of M&A activity coming in the form of innovative investment, compared to 65% for all financial services firms.
Discussion about this post