PE Tech Report


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Private equity activity in financial services up 17 per cent

Private equity firms made 35 investments with a disclosed transaction value of USD8.0bn in the financial institutions group sector during the first half of 2010, up 17 per cent from the same period last year, according to a report by Freeman, an adviser to the financial services industry.

The average transaction size was USD331.2m, down modestly from 1H 2009’s average size of USD365.0m.

In the asset management sector, market stabilisation led to deal activity resuming with four transactions totalling USD226m taking place in the first half of the year, compared to only one transaction valued at USD16m for 1H 2009.

Activity in the banks and broker-dealers sector remained flat in the first half of the year with five completed transactions equalling the amount of closed deals in 1H 2009. However, total transaction value fell to USD905m from USD2.7bn over the same period last year. Carlyle’s USD550m PIPE into Bank of Butterfield was the largest deal for the sector.

In the business services sector, completed deals rose from ten to 13, but deal value fell to USD2.0bn from USD3.2bn in 1H 2009. The secondary buyout of Sedgwick CMS Holdings contributed heavily to this sector’s total with the deal valued at USD1.1bn.

Financial technology deal activity continues to slump with only three closed deals for the first half of the year compared to eight deals in 1H 2009. Transaction value surged from USD354m previously to USD1.9bn aided by the USD1.85bn acquisition of RiskMetrics Group by MSCI; General Atlantic, Spectrum and TCV were among the largest sellers along with public shareholders

With regards to insurance, deal making saw an improvement with closed deals increasing from two to four, and total transaction value increasing to USD1.9bn up from USD540m in 1H 2009. The largest deal in the space involving private equity was the formation of Alterra through the merger of Max Capital Group and Harbor Point for USD1.4bn

Deal activity in the specialty finance space is seeing a recovery with six deals closing worth a total transaction value of USD1.0bn in the first half of the year compared to three deals worth USD505m in 1H 2009. The USD750m initial capital raise by Avolon Aerospace, an aircraft leasing company, was the largest deal involving private equity and included CVC and Oak Hill as investors

Eric C. Weber, managing director of Freeman, says: “Deal volumes collapsed during the crisis, but we now see deal activity accelerating, driven by sales of non-core assets by banks, a more stable economic environment and the re-emergence of the debt financing markets.”

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