Mergers and acquisitions among U.S. financial services companies could increase in both number and value of deals in 2012, if markets improve and European banks sell noncore business units, according to a new report from PricewaterhouseCoopers.
Even with improvements in the bank, asset management and other financial services sectors, the conditions that slowed deal making in the last half of 2011 may continue to hobble M&A activity again in 2012 according to John Marra, leader of PwC's financial services transaction practice. Uncertainty about the financial impact of regulatory reform, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, could also affect the ability to reach agreements.
"European banks are seeking to sell U.S. business operations to meet stricter capital requirements at home, and that has the potential to drive a lot of deal making," said Marra in a satement "But the willingness to sell must be matched by the readiness to buy. And the successful completion of these deals depends, in large part, on perceptions of stability in the financial markets."
There were 756 announced deals in the U.S. financial services industry overall last year, a drop from 840 in 2010. The value of those deals was $71.2 billion, an increase of 40 percent. Almost half that increase came from a single acquisition: the $32.7 billion purchase of HSBC's U.S. card and retail services business by Capital One Financial Corp.
Announced deals specifically in the banking sector fell 24 percent to 248 in 2011 from 325 in 2010. The value of those announced deals rose 40 percent to $16.9 billion from $12.1 billion, according to the report. In 2012, improved bank earnings could spur M&A activity in the sector as investor confidence strengthens, PwC found.