M&A activity in the financial services sector has been pretty robust, as strategic acquirers look for growth they can’t get organically, and financial sponsors look for interesting deal flow.
“The issue for a number of financial services companies is continued weak loan demand or low investment yields, fostering an environment for potential consolidation among strategic buyers,” says Cliff Brokaw, a managing director with Corsair Capital, a private equity firm focused on investing in the global financial services industry.
Banks and insurance companies were actively completing M&A transactions in 2014—a trend that’s expected to continue in 2015.
In November 2014, North Carolina-based BB&T Corp. agreed to pay $2.5 billion for Susquehanna Bancshares while private equity firms Welsh, Carson, Anderson & Stowe was able to sell payment firm TransFirst Holdings Inc. to New York-based private equity firm Vista Equity Partners for $1.5 billion in October 2015.
Welsh Carson locked in a profit of about $700 million, or more than four times the amount it paid to acquire TransFirst from GTCR LLC in 2007.
“With leverage available, it’s an opportune time to be both a seller and buyer,” says Brokaw. Private equity firms have been gearing up for this. According to Preqin’s Fund Manager Profiles online service, there are 51 private equity firms that have managed to collectively amass just over $10 billion in capital commitments in the last 10 years to invest in financial services companies.
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