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The scene is set for a wave of M&A activity in the European financial services market, according to PwC

The first half of 2009 saw extremely low levels of European financial services M&A activity however, as we move towards and into 2010, an increase in deal activity is on the cards.

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Petr Kříž, Financial Services Industry Leader, PricewaterhouseCoopers Audit, said:

“Steady as she goes' has been the ethos throughout the 2009 financial services deal market to date. However, a restructuring-led wave of deal activity will gather momentum across the European financial services landscape as we move into 2010.  We anticipate that financial institutions will continue to identify, evaluate and sell their non-core businesses."

According to the latest ‘European Financial Services M&A Insights’ report from PwC, just €32bn-worth of deals was announced during the first half of 2009, compared with €178bn for the whole of 2008.  Government involvement has cooled significantly throughout 2009 and if government activity were excluded, the figures would be just €19bn for the first half of 2009 compared with €70bn for all of 2008.

Petr Kříž, added:

"The post crisis restructuring in European financial services could bring an increase in the number of private equity backed deals in the sector.  An increasing number of firms have expressed interest in the sector - both in the intermediary and services area as well as in the businesses that take underwriting risk."

Increased activity on the Czech M&A market expected in 2010

Czech financial services sector has not shown any significant M&A transactions during 2009, however it can be expected that an increased activity can be seen in 2010, in line with the expectations in European markets.

Petr Kříž added:
"The M&A activity in the Czech financial services market will depend on the decisions of foreign owners of Czech financial services institutions and their needs for restructuring and divestment of non-core businesses. Also, the investors are waiting for key decisions to be made in such areas as the state support of construction savings banks or pension reform."

European asset management: coming in from the cold?

The short-term future is promising. The industry as a whole has stabilised and a number of positive trends are emerging. As a result there will be attractive opportunities for both trade and financial buyers to return to inorganic growth strategies in the short-to-medium term.

Petr Kříž said:
 “We believe some large financial services institutions will need to continue to strengthen their balance sheets and as a result large asset managers may become available for acquisition. Underperforming small and medium-sized asset managers will attract the attention of both strong trade buyers making bolt-on acquisitions and financial buyers looking to enter into or expand their investment in the financial services industry.”

A new financial services landscape: the operational impact of divestments

European Financial Services look set to undergo major restructuring, with any increase in M&A activity in the sector being determined by the pace of restructuring in the major financial institutions.

Petr Kříž said:
“The ability to act decisively may well prove to be the distinguishing feature of those financial institutions that prove successful in using M&A to reshape their organisations.  We anticipate that the change from being acquirers to sellers may not come easily to some financial services businesses.”

Other PwC press releases, publications, surveys and expert articles can be found at www.pwc.cz/engpress.