PwC predicts a recovery in European M&A deals in 2010, with Spain and Germany as potential hotspots.
Despite a low number of high-value European M&A deals so far this year, professional services firm PricewaterhouseCoopers (PwC) predicts a recovery for the latter half of 2010, with Spain and Germany as potential hotspots.
The PwC report suggests that the growing availability of debt finance, together with private equity funds under pressure to invest, and a bounce back in financial services valuations, may lead to a boost in M&A activity this year.
Nick Page, partner at PwC, says: ‘The expected pick up in financial services M&A activity has not yet materialised with deal levels remaining subdued across Europe. However, M&A volumes will experience a recovery during the year, with the ongoing restructuring of European banking a key driving force. In the UK, the change of government is also likely to be a driver of M&A activity.’
In the first quarter of 2010, European financial services M&A activity amounted to €7.8 billion (£6.5 billion), down from the of the €80 billion recorded during the whole of 2009. Banking deals accounted for 46 per cent of overall deal value, compared to 2 per cent for insurance transactions and 23 per cent for asset management deals. Government-led activity declined to just 4 per cent for the quarter.
Fredrik Johansson, director at PwC, comments: ‘The coming regulatory shake up in the asset management sector has the potential to spur deal activity.’
The report states that EU competition rulings and growing political pressure are adding further impetus to the resurgence of M&A in the German banking sector, whereas in Spain, restructuring of institutions to strengthen margins and balance sheets, and an interest in acquiring non-performing loans portfolios will drive the predicted increase.