Financial Sector Mergers And Acquisitions Fall To 11-Year Lows

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Financial Sector Mergers And Acquisitions Fall To 11-Year Lows

Merger and acquisition activities in the financial sector have fallen to their lowest level since 2002, according to a study by Reuters. Including the PacWest Bancorp (NASDAQ:PACW)’s recent purchase of CapitalSource, Inc. (NYSE:CSE) for $2.3 billion, the financial sector has seen deals worth $133 billion YTD. That’s about 25% lower than the value of deals in the same period last year. This year-to-date period has seen the slowest merger and acquisition activity in the financial industry since 2002 when $82.7 billion worth of deals had taken place.

Financial sector M&A hampered by regulations

Kylie MacLellan of Reuters said that the slow M&A activity is due to regulatory requirements for banks to build more reserve capital. Bank mergers and acquisitions are down 58% from last year, though deals in the insurance sector rose 4% from 2012. Europe remains in trouble. M&A activities across all sectors in Europe have plunged 41% this year. The decline would have been steeper, but a spate of telecom deals announced earlier this week offered some relief. Private equity firms and other potential buyers have failed to persuade banks in the region to offload non-core assets at low prices.

The study shows that the contribution from the U.S., China and France increased from 19% in YTD 2012 to 43% this year. This year, banks accounted for only 33% of the total mergers & acquisitions in the financial sector, down from 58% in the same period last year. The share of insurance M&A rose 4% to account for 21% of total deals in the financial sector. The top three advisers for the financial sector M&A are Morgan Stanley (NYSE:MS), Goldman Sachs Group, Inc. (NYSE:GS) and JPMorgan Chase & Co. (NYSE:JPM).

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Financial Sector Mergers and Acquisitions

M&A activity in technology sector

In the technology sector, Microsoft Corporation (NASDAQ:MSFT) leads the race with 174 M&A deals since 1993, followed by International Business Machines Corp. (NYSE:IBM) and Cisco Systems Inc. (NASDAQ:CSCO) jointly with 164 deals each. Cisco Systems, Inc. (NASDAQ:CSCO) jumped up the ladder by acquiring Sourcefire Inc. (NASDAQ:FIRE) for $2.4 billion. Technology sector deals account for 7.2% of total M&A activity this year so far. Worldwide tech mergers & acquisitions have totaled $84.3 billion YTD, down 19% from 2012. Bank of America Merrill Lynch (NYSE:BAC) remains the top adviser for tech deals.

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