Tiburon puts industry M&A activity at $134 billion

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Financial services industry mergers and acquisitions valuations in 2012 stood at $134 billion, on par with M&A transactions for the industry since 2003 but off 50% since 2006, new research reveals.

Tiburon Strategic Advisors, Tiburon, Calif., published this finding in a study, “Financial Services Institutions Mergers and Acquisitions: Consolidation of the Banking, Brokerage, Insurance, and Asset Management Industries.” The research explores the rapid consolidation taking place in the banking, brokerage, insurance, and investment management markets.

Among the report’s other key findings:

  • The number of financial services industry mergers and acquisitions will slowly increase and eventually level off to 1,045 by year-end 2013
  • The number of mergers and acquisitions will increase to 9,750 by year-end 2013
  • Mergers and acquisitions valuations will likely decrease to $1.05 trillion as larger firms take advantage of purchasing smaller firms at a discount
  • Financial services industry mergers and acquisitions valuations will likely decrease as larger firms purchase smaller niche companies at a discount
  • Financial services industry mergers and acquisitions total 15,000. Adding 6,000 related mergers and acquisitions yields 21,000 broadly defined industry transactions
  • There are almost 9,500 cumulative mergers and acquisitions each year, an increase of almost 50% since 2003
  • There are nearly 1,000 financial service industry cumulative mergers and acquisitions, up 400% since 1985 to 1989
  • Financial services industry mergers and acquisitions account for only 10% of all mergers and acquisitions

Insurance Company Acquirers

  • There are 330 insurance company acquisitions of other insurance companies, up 40% since 1990 but down from the 1996 peak
  • The average valuation of insurance companies acquisitions has been declining since 2001 to $68 million
  • Over one-third of insurance companies have completed or given serious consideration to purchasing other insurance companies in the last 12 months
  • Over one-half of insurance companies have completed or given serious consideration to purchasing blocks of business in the last 12 months
  • Almost one-fifth of insurance companies have completed or given serious consideration to selling their companies in the last 12 months
  • Over 10% of insurance companies have completed or given serious consideration to selling blocks of business in the last 12 months
  • The number of insurance company acquisitions of asset managers has been relatively low, at just 3 to 14 each year
  • The valuation of insurance company acquisitions of asset managers dropped to $153 billion from its high in 2004 and 2005 at $1.7 billion
  • The average valuation of insurance company acquisitions of asset managers has dropped to $19 million from its high in 2005 at $425 million

Investment Management Firm Acquirers

  • Mutual fund price-to-assets under management valuations are the highest compared to private client and institutional asset managers
  • Mutual fund price-to-revenue multiples are the highest amongst private client and institutional asset managers
  • Mutual fund price-to-EBITDA multiples are the highest amongst private client and institutional asset managers
  • Almost all asset managers feel that legal and regulatory issues are their biggest business challenge
  • One-quarter of asset managers have done an acquisition in the past three years
  • The most difficult aspect of doing deals for asset managers is getting reliable data on clients’ profitability and profiles
  • The client retention rate after asset management deals averages around 90%
  • The highest sale prices have gone to the largest TAMPs, both platform and product–oriented firms
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