Noted: Financial M&A drivers for 2010

January 5, 2010

Across the different bits of financial services – such as fund management, broker-dealers, insurance, and trading systems – mergers and acquisitions fell sharply in 2009. But Freeman & Co outlines 10 drivers that should make this a busier year for dealmaking:

“1. Banks and insurance companies continue to assess whether their asset management units
are core to their business, especially those that have stand alone brands or are in non-core

2. Large transformational asset management deals will diminish, but deals in the $3-30 billion
AUM range will increase from current lows

3. Broker-dealer consolidation will continue in 2010 as firms look for combined efficiencies as
well as revenue and income growth opportunities in a tough operating environment

4. Sub-scale alternative trading systems and dark pools will be consolidated by their larger
competitors or rolled up into exchange-backed or bank-backed platforms

5. Organized exchanges will re-start their M&A activities, setting their sights on emerging
market exchanges and technology firms in order to better position themselves to fend off
competition from Alternative Trading Systems (ATS) and Multilateral Trading Facilities (MTF)

6. Selected insurance companies will shed non-core assets and look to streamline and/or
hedge individual product portfolios to limit liabilities

7. Several U.S. life insurance companies are still dealing with serious asset problems on their
balance sheets and will need to raise capital or find a strategic partner

8. Private equity activity will increase in 2010 as waning government support of financial
companies pressures firms to divest non-core assets and an increased ability to obtain bank
and loan funding boosts PE firms’ ability to complete deals

9. Firms will review their international operations critically, especially if small and with nondominant
market positions – many will be divested to local competitors or PE firms

10. Domestic activity will increase in 1H 2010 as overcapacity in the industry spurs deals, but
cross-border interest will not return until increased global economic confidence in 2011″

Freeman press release here.

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