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$Page 1: ?dgZYd ÕfYf[aYd k]jna[]k ljYfkY[lagf · PDF file* ?dgZYd ÔfYf[aYd k]jna[]k ljYfkY[lagf egfalgj C]q Õf\af_k H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013 1,181 1,230 1,160$
First half 2013

Outlook 601Banking and capital markets

02Insurance

03Asset management

04Appendix

05

Overview of

services deal activity

Source: EY analysis of ThomsonONE.com data

<US$100m

US$100-500m

>US$1b

US$500m-1b

United States 18.9 327

Netherlands 8.2 10

Spain 3.1 23

China 3.0 31

United Kingdom 2.4 81

Chile 2.3 8

South Korea 2.3 7

Panama 2.1 2

Ireland-Rep 1.8 6

Brazil 1.7 13

Other 16.9 454

62.7 962

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013

1,181 1,230 1,160 1,120

1,017 1,083

962

79.9

115.4

90.697.1

85.998.4

62.7

No. of deals Deal value (US$b)


Banking and capital markets

60% 58% 58% 56% 58% 58% 56%

23% 23% 26% 27% 25% 26%26%

17% 18% 16% 17%17%

16%17%

1,181 1,2301,160 1,120

1,0171,083

962

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013

Insurance Asset management

H1 2013

H1 2012

US$62.7b

US$85.9b

7%

8%

18%

25%

11%

22%

64%

44%

<US$100m

US$100-500m

>US$1b

US$500m-1b



1. Transaction activity continued to decline, with both deal volumes and disclosed value at their lowest level since our analysis began in 2010.

2. In 2012, we saw a number of government-led bank rescues

(EU) mandated disposals of non-core assets. While in H1 2013, we have seen some activity sparked by government intervention, these “mega deals” in banking have largely disappeared.

3. Investment into high-growth markets remains a key theme, with Eastern Europe and Latin America attracting inbound transaction

respectively in H1 2013.

4. North American investors emerged as the biggest outbound investors, with Western Europe being their favored destination.

5. Results from EY’s Capital show

tempered optimism, as narrowing valuation gaps and improved

environment may provide a spring-board for future activity.

2013, with both deal volume and value at their lowest levels since our analysis began in H1 2010.

Transaction volume declined by 5.4%. However, total disclosed deal

Merger and acquisition (M&A) activity in the banking and capital markets sector recorded a sharp decline in deal volume across

improvement in deal volume.

A mixed picture for transaction activity in the insurance sector, with deal volume improving in Western Europe, North America and Asia

Latin America and Eastern Europe.

Global asset management M&A activity increased in terms of volume compared to H1 2012, with the exception of the Middle East and

than a lack of inbound interest in these regions.

services transactions.

were originated in Europe, with government intervention, bank restructuring and non-core disposals remaining as the key M&A

targets in the banking and capital markets sector in H1 2013, a fact which is in sharp contrast with H1 2012, when all ten of the largest

capital markets sector.



Feb 2013 SNS Reaal Netherlands State of the Netherlands

Netherlands 100 5,047

Feb 2013 Robeco Groep Netherlands ORIX Japan 90 2,590

Jun 2013 OneWest Bank FSB (mortgage servicing rights)

United States Ocwen Financial United States n/a 2,530

Feb 2013 HSBC Bank (Panama)

Panama Bancolombia Colombia 100 2,100

Jan 2013 AFP Provida Chile MetLife United States 100 2,000

Feb 2013 Irish Life Group Ireland Canada Life Canada 100 1,794

Jan 2013 Korea Exchange Bank

South Korea Hana Financial Group

South Korea 40 1,757

Jan 2013 Generali PPF Holding

Czech Republic Generali Italy 25 1,682

May 2013 Banco Citicard

Promotora

Brazil Itaú Unibanco Brazil 100 1,370

May 2013 Santander AM Holding

Spain Warburg Pincus

General Atlantic

United States 50 1,336

-2%

3%

7%

North America

3%

20%

9%

Western Europe

-23%

6%

-23%

29%

-13%

40%Eastern Europe(inc CIS)

-36%

-36%

25%

Latin America

-53%

-31%

-62%Middle Eastand Africa

Asset managementInsuranceBanking and capital markets

+44 20 7951 2005 [email protected]

Western Europe Latin America

North America

Eastern Europe North America


5

North America

Western Europe

Eastern Europe (including CIS)

Latin America

Middle East and Africa 5

543 253 166 962

Western EuropeMiddle East and Africa



6

executives from large companies around the world, conducted by the Economist Intelligence Unit (EIU). Our panel comprises select EY clients and contacts and regular EIU contributors.

While M&A appetite has declined again, narrowing valuation gaps and

springboard for future activity.

acquisitions in the next 12 months. Asset managers are the most acquisitive (42%), while the expectations are much lower among banks (21%) and insurers (34%).

With a more positive outlook on the global economy and higher levels

valuations will increase over the next 12 months.

Looking ahead, there is good reason to be optimistic as our survey shows a marked increase in the level of opportunity in the number and quality of acquisition opportunities, as well as the likelihood of completing acquisitions. With a more settled regulatory environment

an increase in the appetite for acquisitions.

Over the last 18 months, valuation gaps have continued to narrow.

is now 20% or less, with a growing proportion seeing a gap of 10% or less.

Outlook

38%

41%

31%

25%

29%

40%

38% 34%31%

26%

Apr-11 Oct-11 Apr-12 Oct-12 Apr-13

Global Financial Services

36%

30%

31%

54%

44%

34%

Number of acquisitionopportunities

Quality of acquisitionopportunities

Likelihood ofclosing acquisitions

Apr-13 Oct-12

22% 26%5%

46% 42%

47%

32% 32%48%

Apr-12 Oct-12 Apr-13

Decrease Remain at current levels Increase

14%

41%

31%

14%

27%

45%

23%

5%

33%

45%

14%8%

Less than 10% 10– 20% 21– 30% Over 30%

Apr-12 Oct-12 Apr-13

Source:

Source:

Source:

Source:

The global economy is expected to expand moderately, with divergence in the pace of growth between developed and emerging markets. While developed economies will continue to face headwinds

recession in the Eurozone, emerging markets are in a much better

Recovery in the broader economy should give investors some

is tempered as most of the recent deals were driven by regulatory obligations, and the majority of restructuring-driven transactions have already taken place.

Pressure on bank capital levels will remain a key driver of M&A activity in the sector, as banks continue to review strategies around ownership of non-banking businesses and exit non-core geographies.

Growth opportunities in emerging markets could continue to see more inward investment from developed markets. As banks’ capital levels

an increasing ability to structure deals where the price to capital ratio is achievable. Regulatory driven M&A will continue to drive transaction activity, especially in Europe where a number of governments are formulating exit plans for their banking stakes.

The on-going relative strength of M&A activity in the insurance sector has been driven by sellers judging that their price expectations had become more closely aligned with those of buyers. Restructuring of portfolios by insurance companies continues to be a recurring theme, as insurers streamline their operations, focusing on greater capital

However, Solvency II regulations have not proven to be a catalyst for insurance transactions, although we still expect to see activity over the coming years. Investments into growth markets remained a key theme, and we continue to see these markets as an attractive investment destination for global insurers seeking growth.

As equity markets achieve new highs, we expect the asset management sectors’ performance to improve. However, we see existing asset managers as remaining cautious, being primarily focused on organic growth, with acquisitions being modest and

-1

0

1

2

3

4

5

6

7

8

9

2012 2013 2014 2015 2016

% ch

ange

Y-o

-Y

World European Union Central and Eastern Europe Developing Asia

Latin America and the Caribbean Middle East and North Africa United States

Source: IMF

Malcolm Le May

+44 207 951 [email protected]



<US$100m

US$100-500m

>US$1b

US$500m-1b


Netherlands 5.0 2

South Korea 2.1 6

Panama 2.1 1

Brazil 1.6 5

Australia 1.2 22

Indonesia 1.2 6

Belgium 1.1 3

Poland 0.9 5

Taiwan 0.8 4

Other 5.5 275

34.8 543

Transaction activity in global banking and capital markets fell in the

month period since our analysis began in H1 2010.

In comparison to H1 2012, there was an 8% fall in deal volume and a 50% drop in disclosed deal value.

Only Western and Eastern Europe recorded an increase in deal activity compared to H1 2012. Middle East and Africa (53% down),

steepest drops in deal volume.

The US remained the most active market, with a total of 214 deals with

deal volume and a 44% share of global deal value.

710719

672625

593629

543

49.7

74.3

65.3 61.4

69.1

56.0

34.8

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013













Promotora



226

94

115

71

2314

H12013

231

91

150

55

3630

H12012

North AmericaWestern Europe Eastern Europe

(including CIS)

Latin AmericaOther

221

258

223214

231248

226

8.3

24.726.4

9.4 9.3

38.0

13.6

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013


Domestic 220 216 8,472 12,186

Inbound 9 9 = 785 1,419

Outbound 22 21 2,033 1,978

253 247 11,311 15,583


Source: EY analysis of ThomsonONE.com data* Includes deals where the acquirer country is undisclosed


Despite an improving economic outlook, there was a small drop

transactions, compared to 231 in the same prior year period.

Activity was dominated by domestic deals, with only a handful of inbound transactions. The largest of these came in May when the Spanish nationalized lender, Bankia, agreed to sell City National Bank

2013, with the majority of these being small portfolio deals. The

portfolio of corporate and property loans from Suncorp Group of

There was continued consolidation activity in the US community-banking sector, with banks acquiring local peers as well as taking the opportunity to acquire non-core branches and deposits from larger banks.

In response to Basel III regulations that require banks to deduct any MSRs above 10% from the common equity component of tier 1 capital, OneWest Bank FSB, Wells Fargo and Ally Bank all sold substantial MSR

Pressure on margins is driving companies in the exchanges sub-sector to look for acquisition opportunities to expand and diversify their revenue streams. The largest deal came in April, when NASDAQ OMX announced the acquisition of the eSpeed electronic trading platform

In the brokerage sub-sector, low volumes and tight margins continue to drive opportunistic M&A activity, especially in the middle market.

acquisition of Knight Capital’s credit brokerage unit.

institutions (SIFIs) to increase in size, so M&A activity in banking will continue to come from consolidation in the mid-market and within the community banking sector. There may also be further divestments made by foreign owners looking to sell non-core operations.

Already, we have seen increased levels of interest in the payment sector, with payment processors looking to acquire new technologies and services. Private equity is also interested in the sector and could drive consolidation.

As it becomes easier to fund and securitize, we expect to see higher

and auto loan market.

In capital markets, transaction activity will be driven by companies looking to expand geographically or diversify their product portfolio. We could see technology acquisitions play a key role in enabling brokers to stay ahead of their competitors.



Apr 2013 BGC Partners (eSpeed platform)

United States NASDAQ OMX Group United States n/a 1,234

Feb 2013 NetSpend United States Total System Services


May 2013 City National Bank of Florida

United States Banco de Credito e Inversiones

Chile 100 883

Apr 2013 Wells Fargo Home Mortgage (mortgage servicing rights)

United States Reverse Mortgage Solutions

United States n/a 854

Mar 2013 Ally Bank (mortgage servicing rights)

United States Ocwen Financial United States n/a 585

Feb 2013 Capital One Financial (Best Buy credit card portfolio)

United States Citigroup United States n/a 490

Jun 2013 StellarOne United States Union First Market Bankshares

United States 100 443

Jan 2013 Virginia Commerce Bancorp

United States United Bankshares United States 100 442

Apr 2013 Sterling Bancorp United States Provident New York Bancorp


Feb 2013 First Financial United States SCBT Financial United States 100 302

Jun 2013 Suncorp Group (non-core assets)

Australia Goldman Sachs United States n/a 927

Mar 2013 GE Capital (fuel card business)

Australia FleetCor Technologies

United States n/a n/a

Mar 2013 Allianz Finance Australia GE Capital United States n/a n/a

Feb 2013 Seymour Pierce United Kingdom Cantor Fitzgerald United States 100 n/a




With a slowing economy, it is perhaps no surprise that deal activity

transactions, compared to 36 in the same prior year period. Although

Bank (Panama) to Bancolombia.

Transaction activity came almost entirely from companies within the region, with only a few small inbound deals from companies outside of Latin America.

There were only two outbound deals in the period. The most

into the US domestic banking market and came after Bankia agreed to

of its bailout by the Spanish government.

same prior year period. If we consider that seven of the ten largest

institutions are active in Brazil, it is surprising that there were so few transactions in the country.

restructuring their operations.

HSBC, which had already sold businesses in Colombia, Peru, Uruguay and Paraguay, agreed to sell its Panama business to Bancolombia for

on its core Latin American markets of Brazil, Mexico and Argentina.

announcing that it would exit consumer businesses in Uruguay, Turkey, Romania and Pakistan, the company announced in May that it had

Domestic 24 18 1,895 4,347

Inbound 11 3 682 375

Outbound 2 2 = 684 883

38 25 3,261 5,656



45

42 41

3436

42

23

4.9

2.32.0

1.3

2.6

1.8

4.8

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013





Promotora


Jun 2013 Grupo Financiero Reformador

Guatemala BAC Credomatic Panama 100 411

Mar 2013 Banco Popular (non-performing residential mortgage loans)

Puerto Rico Undisclosed United States n/a 347

Jan 2013 Banco Bamerindus do Brasil

Brazil BTG Pactual Brazil 100 210

Brazilian banks, in particular, are facing some important challenges in the near future. The most pressing of these is adjusting their business

could lead to increased levels of transaction activity, as larger banks take advantage of the situation to acquire smaller struggling banks.

With the ratio of credit to gross domestic product (GDP) low in Brazil, in comparison to developed countries, we could also see banks exploiting credit opportunities, potentially through the acquisition of

Despite the current macroeconomic challenges facing the region as a whole, we continue to see strong interest from banks looking to invest in the region, particularly in Brazil, Chile and Colombia. This interest is not only from regional players, but also from a number of large foreign-owned banking institutions.

As the regional economic picture becomes clearer, we expect to see some of this interest translate into tangible deal activity.




Although deal activity in H1 2013 in Western Europe remained stable,

impacted by two mega deals - the acquisition of Banco Financiero y de Ahorros by FROB and the acquisition of RBS Aviation Capital by

Domestic deals dominated the landscape, with the limited outbound activity mainly focused on the US and Russia. Inbound activity

majority of inbound transactions were originated by the US, with deals including Zolfo Cooper’s acquisition of Dock Street Capital (UK provider of asset advisory services) and Apollo Global Management’s acquisition of Finanmadrid, a Madrid-based provider of automobile

The UK was the most active country, followed by Spain, Germany and France. Notable UK transactions included the acquisition by J Sainsbury of the remaining 50% stake in Sainsbury’s Bank from Lloyds

of Seymour Pierce. In Germany, Deutsche Bank agreed to acquire the remaining 51% interest in Xchanging GmbH, a Frankfurt-based provider of securities processing services, from Xchanging PLC for

The largest transaction in the region was the nationalization of Dutch

its real estate loan portfolio.

The largest transaction of the period was the acquisition of the Greek branches of Cyprus Popular Bank, Bank of Cyprus and Hellenic Bank

of the Cypriot banking sector, as part of the bail-out package agreed to between the EU and the Government of Cyprus.

Elsewhere in Europe, Banco Sabadell acquired the retail banking operations of Lloyds in Spain.

2013, including the acquisition of the credit portfolio of Royal Park Investments in Belgium by an investor group, comprised of Lone

acquired the UK commercial real estate loan portfolio owned by Lloyds Banking Group and the unsecured loan book of Spain’s Liberbank.

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013


169

132123 125

91

1069423.7

18.2 19.1

35.737.8

5.78.0

Domestic 73 76 26,256 7,332

Inbound 16 18 11,416 687

Outbound 20 18 822 557

111 114 38,629 8,576





Mar 2013 Cyprus Popular BankBank of CyprusHellenic Bank(Greek branches)

Greece Bank of Piraeus Greece 100 674

Apr 2013 Royal Park Investments (credit portfolio)

Belgium Lone Star FundsCredit Suisse

United States n/a 611

Jan 2013 Ogone Belgium Ingenico France 100 486

May 2013 Sainsbury’s Bank United Kingdom J Sainsbury United Kingdom 50 385

Apr 2013 Banco Gallego Spain Banco Sabadell Spain n/a 245

Jan 2013 Banco Popular Espanol (debt management operations)

Spain EOS Spain Spain n/a 180

Apr 2013 Lloyds (Spanish retail banking operations)

Spain Banco de Sabadell Spain n/a 137

May 2013 Cabot Credit Management

United Kingdom J.C. Flowers & Co. United States 100 n/a

For the year ahead, we expect to see a similar level of transactions happening as European banks continue to exit non-core whole business operations and loan portfolios both in Europe and around the world.

As bank capital levels start to increase/stabilise through improved

where the price to capital ratio is achievable.

Many of these businesses may be small in scale, as we recognize that many of the larger transactions have already happened as a result of the EU remedy regime. We foresee more of a push by some of the larger banks to get smaller deals done and out of the way in H2 2013.

We do expect to see an increase in the volume of loan book transactions, as the banks are increasingly studying their loan portfolios to assess the segments where there could be credible purchasers for certain types of better quality loan portfolios.

The Asset Quality Review process being introduced to all EU-headquartered banks by the European Central Bank (ECB) later in H2 2013 could result in additional provisions being required and, therefore, further disposals to repair possible capital shortfalls might follow.

There were a number of large transactions that did not complete in H1 2013 that are still in progress and will move to completion at some stage either through disposal, restructuring or initial public offering (IPO), e.g., EU-mandated branch disposal by Royal Bank of Scotland and Lloyds Banking Group; “Rainbow” and “Verde”, respectively.

A return to transformational M&A transactions in the sector is not expected, due to capital constraints and regulator concerns. However, we may see more international inbound interest in European banking

more such activity, in H2 2013, combined with further M&A.

such as Spain and Portugal provide for a strong increase in M&A

establish join ventures in their non-core businesses.



May 2013 Lloyds (residential mortgage portfolio)

United States Goldman Sachs

Other investors

United Kingdom n/a 288

Feb 2013 Residential Capital (mortgage servicing assets)

United States Altisource Portfolio Solutions

Luxembourg n/a 219


in terms of the number of deals, in contrast to H1 2012. However,

Denizbank by Sberbank in H1 2012.

Domestic deals dominated the landscape, with limited outbound and inbound activity.

of activity in the Ukraine, Kazakhstan, Poland and Romania. The vast majority of the deals in these countries were inside the respective jurisdictions, such as the acquisitions of Stromcombank and KB SDM-Bank in Russia, as well as the acquisitions of Swedbank and Kreditprombank in Ukraine by Nikolay Lahu.

The largest banking transaction in the region for H1 2013 was the acquisition by PKO Bank Polski of Nordea Bank’s Polish subsidiaries Nordea Bank Polska and Nordea Finance Polska, following Nordea Bank’s retrenchment from Poland due to increased competition in the Polish market and slowdown of the economy.

In Romania, following the resolution of the Agricultural Bank of Greece, its 93% stake in its Romanian subsidiary, ATE Bank Romania,

Elsewhere in Eastern Europe, in Serbia, an investor group comprised of Societe Generale Srbija and Telenor, agreed to acquire KBC Banka from KBC Groep and, in Turkey, Denizbank acquired the consumer banking business of Citibank.

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013


91

119

104

72

55

7671

4.6

9.8

3.1

1.1

6.4

2.1

0.9

Domestic 45 61 5,675 949

Inbound 10 9 774 —

Outbound — 1 — — =

55 72 6,449 949



Jun 2013 Nordea Bank Polska Poland PKO Bank Polski Poland 99 826

Jun 2013 Nordea Finance Polska

Poland PKO Bank Polski Poland 100 59

Apr 2013 ATE Bank Romania Romania Dorin Umbrarescu Romania 93 14

Apr 2013 Swedbank Ukraine Nikolay Lahun Ukraine 100 n/a

Apr 2013 Citibank (consumer banking business)

Turkey Denizbank Turkey 100 n/a

Apr 2013 KBC Banka Serbia Société Générale Srbija Telenor

Serbia 100 n/a

Mar 2013 Stromcombank Russia Expobank Russia 100 n/a

Mar 2013 KB SDM-Bank Russia MILAVER-RUS Russia 52 n/a

Mar 2013 AB Pushkino Russia AA Dobrovinskiy/BS Gudko/TV Galichkina/AS Knyazev

Russia 76 n/a

origin in recent years. While interest stemmed mainly from Western Europe in the 2005-2010 period, we are seeing active interest from acquirers in Eastern Europe, Gulf-region and Asia looking to enter the Turkish market, as they seek growth opportunities (e.g., the acquisition of Denizbank by Russian Sberbank, acquisition of Eurobank Tekfen bank by Kuwaiti Burgan Bank and the recent acquisition of Alternatif Bank by the Commercial Bank of Qatar). In order to avoid license application and approval procedures, the acquisition of an existing Bank seems to be the preferred market-entry route for acquirers.

Further opportunities are expected in the Turkish market driven by (i)

an environment where capital requirements are getting tougher after

a means of entering the Turkish market; and (iii) consolidation needs in an increasingly competitive environment.

Privatization of large state banks (e.g., Halkbank, VakifBank and ZiraatBank) is a longer-term opportunity, with public offerings being a more feasible way of acquiring stakes in these banks.

Continued market consolidation is expected to remain a key theme in M&A activity. The Russian market is still overpopulated in terms of the number of operating banks and, according to estimates from market experts, the 900+ current banks are expected to decrease to approximately 300 in the future.

both organically and through acquisitions, leveraging the developed technologies and business practices that are being left behind by larger foreign groups exiting the market. In addition, the dominant local state-owned banks are increasingly expanding in both their commercial and retail banking opportunities.

Exits of European and US banks are expected to continue as a result

restructuring procedures, narrowing focus on core markets and

owned banks.

The market expects investment from China, Japan and, potentially, other Asian countries. Key reasons include the increase in trade relationships between Russia and Asian countries, leading to a corresponding increase in the demand for banking services, the

investments and the opportunities for further growth and expansion offered by the Russian banking market.

In Ukraine, domestic activity is mainly expected to involve continued exits of foreign banks and takeovers among local players (including

Domestic activity is also expected in Kazakhstan, fueled by the potential reprivatization of troubled banks acquired earlier by state-owned banks and the potential increase of state ownership in the banking sector.

Further consolidation in the region is expected, with strategic

strategic interest from Russian banks and potential exits of Western European banks, as part of group-wide reorganization efforts, will also prove drivers of M&A activity.

Operating model trends going forward include a focus on increasing domestic funding, leverage of internet and mobile banking, improvement of customer experience and a focus on value-added services, such as asset management.






sector slowed down in H1 2013, with transaction volumes of 115, compared to 150 in H1 2012. Deal values fell by nearly 50% from

also fell during the period from 33% in H1 2012 to 19% in H1 2013.

There was limited inbound activity, mainly from US-based acquirers, e.g., Goldman Sachs’ acquisition of the non-core banking portfolio of Suncorp Group in Australia.

acquisition of Royal Bank of Scotland’s residential mortgages portfolio in Germany.

The reduced level of M&A activity in H1 2013 was mainly due to a lack of M&A targets in the banking sector in the region. However, buyer appetite for the limited number of targets remains very high.

The lack of targets in the banking sector in the region has also resulted

companies, e.g., Permata Bank’s acquisition of a 25% stake in Astra Sedaya Finance in Indonesia.

Greater China continues to be an active market in the region, making up approximately 21% of total deal volumes in the region in H1 2013. A high proportion of the deals are brokerage deals, e.g., Guangdong Golden Dragon’s acquisition of Zhongshan Securities, with only a few banking deals during the period.

Japanese institutions remain bullish on Southeast Asia, and are looking at opportunities to grow inorganically. Notable transactions in H1 2013 include SMBC’s acquisition of a stake in BTPN in Indonesia, and SBI Holdings’ acquisition of Hyundai Swiss Savings Bank in South Korea.

The outbound trend into Southeast Asia is mainly due to the rapid expansion of retail banking, combined with the demand for credit from Japanese institutions operating in Southeast Asia. Weak demand for loans, as well as margin pressure in Japan, provide an incentive

further expand and deploy their capital.

We expect this trend to continue over 2013 because of many remaining untapped opportunities.

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013


149138

159144

150139

115

6.9

18.0

14.1

12.0 12.6

5.9 6.5

Domestic 139 103 12,217 5,538

Inbound 10 10 = 399 946

Outbound 10 5 10,056 10

160 120 22,688 6,500






May 2013 Bank BTPN Indonesia Sumitomo Mitsui Banking Corporation

Japan 40 1,280

Jun 2013 Suncorp Group (non-core assets)

Australia Goldman Sachs United States n/a 927

Apr 2013 SinoPac Holdings Taiwan ICBC China 20 787

Mar 2013 Zhongshan Securities

China Guangdong Golden Dragon Development

China 66 418

Jun 2013 Astra Sedaya Finance

Indonesia Bank Permata Indonesia 25 206

Feb 2013 Hyundai Swiss Savings Bank

South Korea SBI Holdings Japan 87 178

Jan 2013 City Savings Bank Philippines Union Bank of the Philippines

Philippines 100 140

Feb 2013 RBS (German residential mortgage portfolio)

Germany Macquarie Australia 100 8

Feb 2013 Celeris (consumer loan business)

Spain Pepper Australia Australia 100 n/a

A number of factors will continue to drive M&A activity in the region — large foreign banks are looking for expansion opportunities outside their saturated and stagnant market; mid-sized regional players are seeking to spread their reach across neighboring countries; and small institutions in developing markets are pursuing partnerships with global institutions to grow and enhance shareholders’ value. Investors remain eagle-eyed on opportunities for

to continue in the long-term.

The banking sector in Vietnam has seen a challenging few years, as credit quality has deteriorated and non-performing loan levels are at a record high. The high interest rate regime in previous years contained

aggravated problems in the banking sector, especially the level of non-performing loans (NPL). In December 2012, the State Bank of Vietnam

that the ratio was actually higher than 10%.

The SBV will be setting up an asset management company — Vietnam Asset Management Company (VAMC) in July 2013. VAMC’s mandate will be to buy debts from banks via debt issuance (zero-coupon, and

obtain funding from the SBV.

Banks will be required to record a 20% annual allowance on such debt issued by the VAMC. If the bank is unable to recover the NPL

VAMC to the bank will then be fully written off; if the bank is able to recover the NPL (or a portion of it), it can redeem the VAMC-issued debt against the recovered NPL. While the sale of NPL from banks to the VAMC will be on a voluntary basis, VAMC will have the power to force banks to transfer NPLs until they reach an NPL ratio of below 3%.

The establishment of VAMC is crucial for the country to move forward with its effort to restructure the banking sector. This is a positive development for the country’s investment outlook, as it aims to revive sluggish credit extension, which was a key contributor to the slowdown of the nation’s growth rate in 2012.

Despite the generally positive response to the VAMC establishment, there are some concerns about implementation, including that VAMC will only buy NPLs from lenders with bad debts of 3% and above. Also, the question remains as to how VAMC will deal with bad debts

Moreover, some banks are of the opinion that it would not be easy to deal with NPLs through VAMC because it was only mandated to buy loans backed by collateral, which means that uncollateralized NPLs will remain on the banks’ balance sheets.




Across the Middle East and Africa, there has been a sharp drop in deal activity. There were only 14 deals recorded in H1 2013, compared to 30 deals in the same period last year.

United Bank’s sale of its 29.4% stake in Qatar-based Ahli Bank to Qatar Foundation for Education, Science and Community Development for

Inbound activity remained muted, with only two transactions in H1 2013. Both of the deals involved investments in Africa, with the world’s second largest continent continuing to attract interest as companies look to position themselves to participate in the growth story. South Africa has been attracting the most interest.

There were four outbound deals during the period, all of which were

M&A activity in the Middle East market remains focused on domestic transactions, with overseas players deciding to stay away from deal making as they wait for the macro environment to become more favorable.

long-running debt restructuring and helps FGB to increase its customer base in a market where credit card penetration is Increasing.

Dubai Islamic Bank (DIB) increased its stake to 100% in Islamic housing

Dubai’s real estate market is showing some signs of recovery, DIB’s takeover of Tamweel is likely to contribute towards the re-emergence of a stronger mortgage sector in the region.

With equity markets bouncing back globally, brokerages have attracted interest (two deals during H1 2013). HSBC, which has been looking to exit its non-core business, sold its stake in its merchant acquiring business based out of Oman to Bank Muscat.

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013


35

30

22

36

30

18

14

1.11.3

0.6

2.0

0.4

2.7

0.9

Domestic 26 12 308 927

Inbound 4 2 55 —

Outbound 6 4 516 —

36 18 878 927



We expect transaction activity to be driven by foreign banks divesting their operations in the region in order to focus on their core markets. BNP Paribas and Société Générale have already exited the Egyptian market and we could see further exits in the future.

Iraq is one country where we expect to see an increased level of transaction activity. The economy continues to gather strength, with increasing levels of credit penetration, and the security situation appears to be stable enough for a renewal of inbound investor interest in the country.

In Nigeria, we expect to see the Asset Management Corporation

has appointed advisors in advance of a possible sale or IPO process. Investment in any of the three banks would enable a foreign investor to establish a presence in Nigeria, the most populous country in the Africa. We also expect all of the Big 4 South African banks to continue looking to either establish or increase their Africa penetration in Nigeria, although price remains a major hurdle for suitable potential targets.

Elsewhere in West Africa, we expect to see continuing inbound M&A activity as foreign investors look to countries such as Ghana which, while smaller than Nigeria, is often seen as a foothold for an initial presence prior to further regional expansion. Together, we see Ghana and Nigeria as the key focal points for foreign interest. The other markets, from a banking perspective, do not currently have scale to necessarily be as attractive to the large global banks.

In markets such as Zimbabwe and Zambia, we expect to see further consolidation of the multitude of banks, although indigenization in Zimbabwe remains a key challenge reducing the attractiveness of such opportunities. We believe that Angola’s banking market will continue to attract considerable interest from foreign players. It has been the continent’s largest growth market in the sector, having increased in asset size four fold through the last decade. The need for infrastructure upgrades to stimulate the economy will provide continued opportunities for established banks and newcomers alike. However, the overall business environment remains a major challenge for new entrants, not the least of which, getting the necessary regulatory approvals. China continues to grow its presence across the continent, and Chinese banks are no exception, following Chinese companies’ growing footprints. There will be increased interest from across the globe to ensure a presence in Africa, driven by increasing fortunes, and the need to be part of that growth story.

As Africa moves towards the Basel framework, the high cost of compliance for some smaller banks is also likely to present acquisition opportunities. The advent of providing cost-effective banking facilities via mobile banking platforms will allow more banks to target the increasingly attractive retail segment. Overall, we expect to see interest from foreign and local banks alike tapping into the still mostly unbanked population, and capitalizing on this growth potential, whilst


+971 4 70 10 100 [email protected]

Jan 2013 Ahli Bank Qatar Qatar Foundation Qatar 29 616

Jun 2013 Dubai First United Arab Emirates

First Gulf Bank United Arab Emirates

100 163

Jan 2013 Tamweel United Arab Emirates

Dubai Islamic Bank United Arab Emirates

42 127

May 2013 Banco Unico Mozambique Nedbank Group South Africa 36 n/a


Insurance


<US$100m

US$100-500m

>US$1b

US$500m-1b


Ireland 1.8 2

China 1.8 5

Czech Republic 1.7 2

Spain 1.4 6

Canada 1.1 11

Turkey 0.9 1

Mexico 0.9 2


Malaysia 0.4 4

Other 1.8 90

17.0 253

Transaction activity in the global insurance sector has remained relatively stable, recording 253 deals in H1 2013 compared to 252

2013 compared to the same prior year period.

The US remains the most active target country by volume and value, driven mainly by domestic deals.

themes in the industry, with insurers such as AIG, Aviva, Generali, MetLife and Zurich, divesting non-core businesses to release and redeploy capital for the growth of their core operations.

Growth in emerging markets is also a continuing focus area for a number of insurers in 2013, with several insurers seeking inorganic growth in Asia, Latin America and Central and Eastern Europe.

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013


266

286

298302

252

279

25318.4

30.3

19.5

26.4

10.4

26.0

17.0




Jun 2013 The Dominion of Canada General Insurance Company

Canada The Travelers Companies


Apr 2013 MONY Life Insurance

United States Protective Life Insurance


Apr 2013 National Financial Partners

United States Madison Dearborn Partners

United States n/a 1,016


102

72

34

2016 9

H12013

99

60

32

23

2513

H12012


Latin AmericaOther

transactions, compared to 124 in the same prior year period. Despite

The vast majority of transaction activity was undertaken by entities

the region. In Latin America, there were 16 deals, of which 5 were investors outside Latin America looking to expand their footprint in that region.

Europe remains an attractive target market for American insurers. Out of a total of eight outbound deals, six were in Europe. The largest of these was Canada Life’s acquisition of state-owned Irish Life for

including General Atlantic’s acquisition of a 34% stake in Hyperion Insurance and Aquiline Capital Partners’ acquisition of auto insurer Equity Insurance.

Continuing low interest rates, in conjunction with demographic

position. As a consequence, insurers are looking to exit annuities as margins come under extreme pressure.

This follows an active market in 2012, when Apollo (through Athene) announced the acquisition of the US annuity and life businesses of Aviva, and Guggenheim Partners (through Delaware Life) acquired Sun Life Financial.

Private equity interest in the non-underwriting brokerage sector remains strong. The largest single private equity transaction was

National Financial Partners.

With continued uncertainty around the impact of Solvency II on foreign operations, a number of European insurers, including AXA and Generali, divested businesses.

Deal activity in the property and casualty (P&C) sector was relatively

with the exception of The Travelers Companies’ acquisition of The

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013


102

117

139150

124

144

118

7.48.6

8.2

14.0

5.3

12.3

7.2

Domestic 111 114 4,398 7,164

Inbound 12 4 884 —

Outbound 11 8 494 1,929

135 126 5,776 9,093

Insurance



The uncertain, albeit improving, economic environment, allied to low interest rates, continues to challenge the industry’s ability to grow and improve underwriting results and expand investment income opportunities.

Despite these impediments, growth opportunities through acquisitions, including international expansion plays, as well as product solutions targeting new insurable risks and coverage expansions, are insurers’ current focus.

We believe that transaction activity will pick up in the second half of 2013, with private equity likely to be a seller of assets acquired in the brokerage and services space between 2005 and 2008.

buyers in the Americas, as M&A is the only way to enter that market, given that no new underwriting syndicates are being established.

Jun 2013 The Dominion of Canada General Insurance Company

Canada The Travelers Companies


Apr 2013 MONY Life Insurance

United States Protective Life Insurance


Apr 2013 National Financial Partners

United States Madison Dearborn Partners

United States n/a 1,016

May 2013 John T. Fretz Insurance Agency

United States Univest Corporation of Pennsylvania


Jun 2013 Generali US Holdings

United States SCOR Global Life Americas Holding


Jun 2013 Seguros Banorte GeneraliPensiones Banorte Generali

Mexico Grupo Financiero Banorte

Mexico 49 858

Mar 2013 Cruz del Sur Chile Grupo Security Chile 100 300

Feb 2013 CMG Mortgage Insurance

United States Arch Capital United States 100 300

Jun 2013 American Safety Insurance

Bermuda Fairfax Financial Holdings

Canada 100 290

May 2013 Global Atlantic (Goldman Sachs Reinsurance)

United States Investor group United States 75 n/a

May 2013 Aviva USA (life insurance business)

United States Global Atlantic United States 100 n/a

Apr 2013 Cooper Gay Chile Chile Cooper Gay Swett & Crawford

United Kingdom 50 n/a


Mar 2013 Hyperion Insurance Group

United Kingdom General Atlantic United States 34 136

Apr 2013 Equity Insurance Group

United Kingdom Aquiline Capital Partners

United States 100 n/a

Feb 2013 AIG Israel Insurance Israel AIG United States 50 n/a



Transaction volume increased from 60 deals to 72 in H1 2013,

number of deals coming from North American buyers. The largest of

also a continuing high level of interest from private equity investors in the sector. General Atlantic acquired a stake in Hyperion and Aquiline Capital acquired Equity Insurance Group in the UK.

Although there were fewer outbound deals from Western Europe, the disclosed deal values of those transactions increased by 63% to

opportunities offered by these regions.

The UK market was particularly active in H1 2013, with 42 transactions in the period, including Royal London’s acquisition of Co-operative Insurance Society, Legal & General’s acquisition of Lucida and TDR Capital’s acquisition of MGM Advantage.

While Solvency II is not proving to be a catalyst for the general

has been an underlying increase in the pace of insurers reviewing their operations and taking the decision to exit from non-core activities. Such restructuring of portfolios by insurance companies continues to be a recurring theme, as insurers streamline their operations, focusing

Key examples of major insurers seeking to dispose of non-core operations and execute on their announced strategic realignments include Aegon, which sold its stakes in Mediterraneo Vida and Unnim Vida de Seguros in Spain as part of its efforts to restructure the Spanish business, and Aviva, which sold subsidiaries in Romania (Aviva Pensii Private) and Russia (Aviva SK) to focus on core markets and activities.

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013


8783

76

93

60

74 728.2

3.4

4.0

9.2

1.4

7.1

4.1

Domestic 56 63 1,051 2,123

Inbound 4 7 300 1,929

Outbound 23 14 2,019 3,298

83 86 3,370 7,351

Insurance



Investment into growth markets remains a key theme. We are continuing to see the Central and Eastern European market as an attractive investment destination by Western European insurers seeking growth, and we expect this to remain a theme in the next 12 months.

The pressure from the local and European authorities on Iberian credit institutions to reorganize their operations has led to increased M&A activity in the insurance sector. The reorganization of the distribution

insurance M&A during H2 2013.

Another unfolding theme for Spanish insurance M&A is the

Solvency II. The new regulation may encourage insurers to now look for opportunities to expand into other Spanish regions and diversify into new business lines.

Lastly, for the large Spanish players, the lack of growth opportunities in Iberia leads to an increasing interest in opportunities to expand internationally, particularly in emerging markets in Latin America or in Asia.



May 2013 Mediterraneo Vida Spain Banco de Sabadell Spain 50 590

Feb 2013 Unnim Vida SA de Seguros

Spain Unnim Spain 50 476

Mar 2013 Co-operative Insurance Society

United Kingdom Royal London Mutual Insurance

United Kingdom 100 331

Jan 2013 Cajasol Vida y Pensiones de Seguros y Reaseguros

Spain CaixaBank Spain 50 290

Jun 2013 Lucida United Kingdom Legal & General United Kingdom 100 233

Mar 2013 Hyperion Insurance Group

United Kingdom General Atlantic United States 34 136

Mar 2013 RaetsMarine Insurance

Netherlands Amlin United Kingdom 100 65

Jun 2013 Key Retirement Solutions

United Kingdom Phoenix Equity Partners




Mar 2013 Yapi Kredi Sigorta Turkey Allianz Germany 94 874

Apr 2013 Tianping Auto Insurance

China AXA France 50 631

Jan 2013 Generali PPF (insurance operations in Russia, Ukraine, Belarus and Kazakhstan)

Russia PPF Group Netherlands 100 105


The Eastern European market continues to be mainly an inbound

Western European buyers looking for growth opportunities.

acquisition of an additional 25% stake in Generali PPF Holding, its

One of the major deals in the region in H1 2013 was Allianz’s acquisition of a majority interest in Yapi Kredi Sigorta in Turkey for

growth market.

Activity from foreign players was the main driver behind major transactions. The split of the joint venture between Generali and PPF

Aviva, executing on its reorganization strategy. Other transactions in Russia in H1 2013 represented mainly local domestic activities.

The announced merger between Reso-Garantia and VSK, two of the largest Russian insurers, failed to materialize, due to changes in market practice requiring more capital to be set aside from insurance

Two major transactions in the Romanian market involved the disposals of the Romanian subsidiaries of two Western European insurers, namely Aviva’s disposal of Aviva Pensii Privati, acquired by Alico Insurance Romania, and Achmea’s disposal of Eureko Asigurari to Aegon.

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013


24

32

24

28

23

17

20

0.4 0.3

0.5 0.5

1.0

0.2

2.7

Domestic 13 14 9 46

Inbound 10 6 996 2,661

Outbound — — = — — =

23 20 1,005 2,707

Insurance





Mar 2013 Yapi Kredi Sigorta Turkey Allianz Germany 94 874

Jan 2013 Generali PPF (insurance operations in Russia, Ukraine, Belarus and Kazakhstan)

Russia PPF Group Netherlands 100 105

Feb 2013 SK Aviva Russia NPF Blagosostoyaniye

Russia 100 46

Jan 2013 Eureko Asigurari Romania Aegon Netherlands 100 n/a

Jun 2013 Nordea Polska Poland PKO Bank Polski Poland 100 n/a

more robust business models and leaner cost structures.

Extremely low penetration of non-life insurance in Turkey (approximately 1% of GDP) may attract the interest of foreign players wishing to capitalise on the growth opportunities.

Another driver of insurance M&A activity in Turkey will be the

insurance segment.

No large insurance deals are envisaged for the second half of the year, but opportunities are expected in the mid- and low-end of the market.

players from the US, Europe and Asia (mainly Japan).

The main reason behind this interest is the fact that the Russian insurance market demonstrates high potential for further development in terms of product offering, regional coverage and business technologies. In addition, a number of changes to insurance market regulations are currently under discussion, including the liberalization of tariffs in obligatory motor insurance and the improvement of medical and life insurance systems, which could drive insurance sector transaction activity.

With regards to the CIS markets, consolidation is expected in the mid to long term.




transactions, and deal activity has remained stable in H1 2013 compared to H1 2012.

Domestic M&A deals remain the main source of transaction activity, and inbound deals into the region are dominated by European

acquisition of a 50% stake in Tianping Auto Insurance in China.

There were a number of transactions in H1 2013 which were driven by the on-going non-core disposals by European players who are still in the process of restructuring and streamlining their operations. Examples include:

Aviva’s disposal of CIMB Aviva Assurance and CIMB Aviva Takaful in Malaysia

HSBC’s sale of its life and medical insurance business in Singapore

HSBC’s sale of its insurance business in Macau

ING’s sale of its insurance business in India

We believe that this trend is likely to continue over the rest of 2013, but may then start to taper off.

Japanese acquirers were the most active in the region, particularly in cross-border transactions, e.g., Dai-Ichi Life Insurance Co.’s acquisition of a stake in PT Panin Life in Indonesia.

by Japanese players making acquisitions in the Middle East and Africa, e.g., Tokio Marine’s acquisition of Nile General Takaful and Nile Family Takaful in Egypt, and ORIX Corp.’s acquisition of a stake in Mediterranean & Gulf Insurance & Reinsurance in Bahrain.

The Southeast Asian market is particularly attractive to Japanese acquirers, given its high growth potential, low penetration rates, higher disposable income and a growing population. This trend

expand regionally, becoming larger regional players capable of competing more effectively, not only against regional peers but also against Western institutions.

We expect this trend to continue over the remainder of 2013, given the current strong appetite being shown by Japanese institutions.

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013


42 43

49

24

3236 34

2.4

17.0

6.3

2.61.5

6.12.9

Domestic 24 29 937 2,257

Inbound 8 5 610 637

Outbound 2 5 420 208

34 39 1,967 3,102

Insurance



May 2013 Taiping Life Insurance

China China Taiping Insurance

Hong Kong 25 910

Apr 2013 Tianping Auto Insurance

China AXA France 50 631

Jan 2013 CIMB Aviva TakafulCIMB Aviva Assurance

Malaysia Kazanah NasionalSun Life Financial

Malaysia Canada

98 368

Jun 2013 PT Panin Life Indonesia Dai-ichi Life Japan 40 337

May 2013 Taiping General Insurance


Hong Kong 39 210

May 2013 Tower Life Insurance New Zealand Fidelity Life Assurance

New Zealand 100 157

Mar 2013 Dongbu Life Insurance

South Korea Dongbu Insurance South Korea 24 112

Apr 2013 HSBC Insurance

business)

Singapore AXA France n/a n/a

Apr 2013 HSBC Insurance Macau QBE Insurance Singapore n/a n/a

Jun 2013 Mediterranean & Gulf Insurance & Reinsurance Company

Bahrain ORIX Corp Japan 26 200

Apr 2013 Nile Family TakafulNile General Takaful

Egypt Tokio Marine & Nichido Fire

Japan 60 8

Jan 2013 Long Life Seguros Ecuador QBE Insurance Australia 100 n/a

Despite the economic slowdown (2013 GDP growth forecast was lately lowered by the Indonesian Government from 6.8% to 6.3%) and a depreciation of the Rupiah against the USD, M&A activity in

2013.

The sector remains very attractive for foreign investors, as the insurance penetration rate in Indonesia (1.3% for life and 0.5% for non-

life sectors compares favorably with other regional markets. Given that a number of sizeable assets have been acquired over the past two

years, we expect that transactions will be limited to a few remaining medium-sized insurance targets in the coming months.

Uncertainties in the lead-up to the general elections in 2014 and

subsidies) may also affect the appetite for transactions in the region in H2 2013.


+852 2846 [email protected]

Asset management


<US$100m

US$100-500m

>US$1b

US$500m-1b

Netherlands 3.1 5

Chile 2.0 3

Spain 1.3 4



China 0.6 10

Peru 0.5 3

Australia 0.3 8

Switzerland 0.2 12

Canada 0.1 21

Other 0.3 53

10.9 166

Deal volume in the Asset Management sector in H1 2013 decreased to

Western Europe and North America remained the most active target regions in terms of deal volume, with deal volume in Asia reduced from

market volatility.

In terms of disclosed deal value, Netherlands tops the list with

The ten largest deals accounted for 77% of the total asset

namely the acquisitions of Robeco by Japan’s Orix Corp., of Administradora de Fondos by Metlife and of Santander’s AM unit by Warburg Pincus and General Atlantic.

These deals were effectively disposals of bank-owned asset management units. The remaining seven largest deals were domestic transactions.

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013


205225

190 193172 175 166

11.710.8

5.8

9.3

6.3

16.5

10.9




Spain Warburg PincusGeneral Atlantic


Mar 2013 Cazenove Capital United Kingdom Schroders United Kingdom 100 644

Jan 2013 Founder BEA Trust China Founder Securities (46%) Founder Hesheng Investment (24%)

China 70 460


47

63

34

710 5

H12013

44

58

44

58

13

H12012


Latin AmericaOther

Asset management remains an active sector for transactions, with a total of 57 deals H1 of 2013, a small increase from 52 deals in the same period a year ago. Disclosed deal value also increased from

The largest deal in H1 2013 was MetLife’s acquisition of AFP Provida,

gave MetLife access to the Latin American retirement market, which is attractive due to changes in the regulatory framework.

The majority of transaction activity was undertaken by entities within

region.

Europe remains an interesting, if volatile, market with buyers making opportunistic acquisitions. One of the largest deals came in May when

50% stake in a holding company that will integrate Santander Asset Management’s 11 asset management companies, located primarily in Europe and Latin America.

Asset managers are looking to expand their footprint, both internationally and by product. In H1 2013, there were a number of deals that followed this theme:

BlackRock’s acquisition of the independently-managed private

Property Advisors

Canadian Imperial Bank of Commerce’s acquisition of Atlantic Trust Private Wealth Management from Invesco

Principal Global Investors’ acquisition of a 55% stake in London-based Liongate Capital Management

there were selected divestitures of asset managers from larger

Genstar Capital and Aquiline Capital’s acquisition of Genworth’s wealth management and alternative investments business

Crestview Partners’ acquisition of Victory Capital Management from KeyCorp

Domestic 48 51 2,118 3,708

Inbound 3 6 — 203

Outbound 8 8 = 1,138 1,436

60 65 3,256 5,347

Asset management


H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013


55

75

59

68

52

6357

3.0

4.3

0.83.7

2.1

12.8

3.9


There are few opportunities and currently little appetite for large transformational deals. Instead, we expect to see a return of strategic

Transactions will be driven by investors’ demand for “differentiated”

needs. Within traditional strategies, there will be continued demand

investments.

Demand for alternative asset classes appears to be increasing, including infrastructure, real estate and hedge funds.

Both traditional and alternative asset managers will be increasingly focused on addressing their ability to offer liquid alternatives products

US managers continue to eye opportunities in Europe and selected developing markets in Asia and Latin America. Acquisitions will target access to product manufacturing and distribution.

acquire asset management platforms in the US.

Most strategic buyers approach acquisitions requiring a controlling stake, but a smaller number of buyers will consider minority stakes.


Mar 2013 Genworth Wealth Management

United States Aquiline Capital PartnersGenstar Capital


Apr 2013 AFP Horizonte Peru AFP Integra Peru 50 257

Apr 2013 AFP Horizonte Peru AFP Profuturo Peru 50 257

Feb 2013 Victory Capital Management

United States Crestview Partners United States 100 246

Apr 2013 Atlantic Trust Private Wealth Management

United States Canadian Imperial Bank of Commerce

Canada 100 210

Feb 2013 Artio Global Investors

United States Aberdeen Asset Management



Spain Warburg PincusGeneral Atlantic


May 2013 Macquarie Global Property Advisors

Australia BlackRock United States 100 n/a

May 2013 Signet Capital Management (alternative funds business)

United Kingdom Morgan Creek Capital Management


Apr 2013 ING Bank (custody services business in Bulgaria, Czech Republic, Hungary, Romania, Russia, Slovakia and Ukraine)

Various CEE countries

Citigroup United States 100 n/a

Mar 2013 Liongate Capital Management

United Kingdom Principal Global Investors


Jan 2013 Credit Suisse (European exchange traded funds business)

Switzerland BlackRock United States 100 n/a



for 2012, suggesting that 2013 will be the busiest year for European

Cross-border transactions, especially transatlantic deals, contributed

this period, with a 234% increase in disclosed inbound deal values compared to H1 2012.

Divestitures of bank-owned asset managers continues to be a key theme, although there are slow-down signs, with the top two transactions in the half year period being Rabobank’s disposal of Robeco, and Santander’s disposal of a 50% stake in its asset management business. These deals account for more than 65% of the announced transaction value and it is notable that they were concluded by a new entrant to asset management or as a buy-out transaction.

International banks continue to withdraw from participation in offshore wealth management markets. Additionally, the introduction of new distribution and revenue models, as well as continued cost pressures from new regulations, is driving consolidation in the sector. Notable transactions in H1 2013 include Schroders’ acquisition of Cazenove Capital Management, Credit Suisse’s acquisition of Morgan Stanley’s non-US private wealth management business and Standard Life’s acquisition of the private client division of Newton Investment Management.

despite the increased scrutiny by global tax authorities in the segment. Notable transactions in H1 2013 include Intertrust’s acquisition of

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013No. of deals Deal value (US$b)

8084

76 74

6359

70

4.3 4.2 4.4

3.22.9

2.6

6.0

Domestic 56 59 1,701 1,939

Inbound 6 10 1,219 4,075

Outbound 3 8 — 175

66 78 2,920 6,189

Asset management





Spain Warburg Pincus General Atlantic


Mar 2013 Cazenove Capital United Kingdom Schroders United Kingdom 100 644

Jun 2013 ATC Group Netherlands Intertrust (Netherlands)

Netherlands 100 396

May 2013 Lloyds (international private banking)

Switzerland Union Bancaire Privee

Switzerland 100 150

Feb 2013 Newton (private client division)

United Kingdom Standard Life United Kingdom 100 127

Apr 2013 IPES Holdings Guernsey United Kingdom 100 77

Mar 2013 Liongate Capital Management

United Kingdom Principal Global Investors


Jan 2013 Credit Suisse (European exchange traded funds business)

Switzerland BlackRock United States 100 n/a

Mar 2013 Morgan Stanley (European wealth management business)

United Kingdom Credit Suisse Group Switzerland 100 n/a

Feb 2013 Artio Global Investors

United States Aberdeen Asset Management


Apr 2013 Perpetual Trust New Zealand Andrew Barnes (investor)


courtship period that is common to most deals in the present market. The recent equity bull market has led to a convergence of price expectations of buyers and sellers, and this has enabled some deals to close and to build the transaction pipeline.

Pressure on bank capital will remain a key driver of M&A activity in the sector, as banks continue to review strategies around ownership of asset management businesses. A number of bank and insurance-owned captive asset manager deals are in the pipeline, and this could increase if there is a rise in interest rates, which will create a need for further capital-raising activity by banks.

For the most part, we see existing asset managers as remaining cautious, being primarily focused on organic growth, with acquisitions

offering opportunities for small-scale, but strategic, actions.

A number of companies, particularly among global players, driven

or boosting scale and branding) and seeing a lack of attractive

targets in the current market, have shifted strategic priorities to the restructuring of their own asset management businesses, including fund consolidation.

We expect continuing activity in the alternatives space, mainly stemming from generational transfer issues, the ongoing search for quality products from long-only managers and consolidation in the funds of funds space.

We expect inbound acquisitions of European asset managers, especially from non-traditional buyers such as private equity investors, overseas strategic players and consortia of investors with diverse background, to continue in H2 2013.

In particular, North American buyers seek to tap new markets for their products and expand operations by targeting established businesses. Asian buyers are using low execution-risk strategies, such as distribution agreements and acquisition of minority stakes, in order to diversify their product portfolio from their home markets.

In terms of outbound activity, market volatility in Asia may reduce European asset managers’ appetite for expansion in the region.



Transaction volumes in the region dropped by 23% from 44 in H1 2012 to 34 in H1 2013.

Despite ongoing interest among foreign asset managers in

UK acquirers, including Henderson Group’s acquisition of a 33% stake

of inbound interest in the region.

While transactions in H1 2013 were dominated by traditional mutual fund managers, there is a growing interest from inbound strategic investors in regional alternatives managers, with a focus on hedge fund managers and private equity fund managers. Activity in the various property funds management sectors has also picked up, but is focused largely in Australia.

Outbound appetite remains strong from a handful of regional managers aiming to reach or cement their position as regional or global managers, and select Japanese, Korean and Australian managers remain active participants in both informal discussions and formal processes.

Japanese players were the main source of outbound deals in H1 2013, and notable transactions in the period include ORIX Corporation’s

Post Advisory Group, a California-based asset manager.

China and Australia were the most active markets for deals in H1 2013, with a number of domestic deals. The asset management

In China, numerous regulatory changes over the last six months

a catalyst for transactions. New regulations issued by the China Securities Regulatory Commission (CSRC) on the mutual fund business of asset management companies (effective 1 June 2013) have opened up the sector to new participants, including domestic insurers and securities companies as well as private equity and venture capital fund managers. There has been a stream of other developments, including the legitimization of private fund managers, issuance of

approval processes for innovative funds and opening of domestic funds distribution to new channels, including foreign banks and online payments platforms.

In Australia, asset managers are dealing with both an increased compliance burden, and downward fee and margin pressures as a result of institutional investors reducing mandated manager numbers and actively managing investment management fees. These developments are impacting operating margins and funds-under-management break even points for independent managers and causing boutique and sub-scale managers to consider transactions that provide them with access to enhanced distribution and working capital during their growth phase.

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013


60 60

47 45 44 46

34

2.22.0

0.5

2.1

0.71.0

0.9

Domestic 37 29 744 871

Inbound 4 5 — 10

Outbound 2 4 81 2,677

46 38 825 3,558

Asset management



Jan 2013 Founder BEA Trust China Founder Securities (46%) Founder Hesheng Investment (24%)

China 70 460

Feb 2013 Shanghai Yufu Asset Management

China Lasa Guandao Management Consulting (29%)Xinjiang Ruiju Equity Investment Partnership (12%)

China 41 71

May 2013 Taiping Asset Management


Hong Kong 20 25

May 2013 Jiangsu Skyrun Asset Management

China Jinyuan Holding Group

China 42 12

Apr 2013 Perpetual Trust New Zealand Andrew Barnes (investor)


Mar 2013 RV Capital Management

Singapore Ascalon Capital Managers

Australia 30 n/a

May 2013 90 West Asset Management

Australia Henderson Group United Kingdom 33 n/a

Jun 2013 Daiwa Asset Management

India SBI Funds Management

India n/a n/a


Apr 2013 Post Advisory Group United States Nippon Life Insurance

Japan 20 38

While most large foreign asset managers already have operations in

We believe that there will be more opportunities going forward, considering that some smaller domestic asset managers may be looking at strategic investors to increase the size of their assets under management and enable them to reach a scale suitable to compete against larger peers and to obtain institutional and pension advisory mandates.

Scarcity of 100% or control opportunities continues to be an issue for some Western asset managers. While minority deals have historically accounted for approximately 25% of US and European

as China) prevent foreign investors from controlling interests, the main driver for the dominance of minority equity transactions in the

generally aren’t under capital pressure, and strong growth rates mean

to seek strategic and technical support via partnering as opposed to exiting.

Deal size has historically been another issue for Western managers

seeing global managers pursuing targets that are small by Western standards. This is in part because growth rates and fee levels remain materially higher in the region. Notwithstanding the impact of distribution commissions (in all but two regional markets, bank channels account for >60% of retail mutual fund sales), many Asian

Western peers.

Managers of “globally relevant” asset classes (e.g., regional asset classes) remain both in demand and scarce, although domestic managers in select scale (Australia) or growth (China, Indonesia) markets remain attractive.

Continued strong growth in the Singaporean wealth management sector ensures that Singaporean targets will remain in demand. In

and mutual recognition between mainland China and Hong Kong has refocused attention on Hong Kong as the likely domicile for funds products that provide mainland Chinese investors with access to non-domestic asset classes and funds products.



Appendix

analysis of ThomsonONE.com data from 1 Jan 2010 to 30 Jun 2013.

Data was extracted from the ThomsonONE.com database using

We have included selected additional transactions that were not in the ThomsonONE.com database.

services only includes companies in banking and capital markets, insurance and asset management sectors.

Deals include transactions (announced or completed) where the

Deals where less than 20% (disclosed) of the company was acquired have been excluded from this analysis.

Equity investments were included (corporate and private equity).

Joint ventures were not included.

There is no minimum disclosed value deal threshold.

The information and opinions contained in this document are derived from public and private sources that we believe to be reliable and accurate but which, without further investigation, cannot be warranted as to their accuracy, completeness or correctness. This Information is supplied on the condition that EY,

not liable for any error or inaccuracy contained herein, whether negligently caused or otherwise, or for loss or damage suffered by any person due to such error, omission or inaccuracy as a result of such supply.

Appendix

Amsterdam, Atlanta, Boston, Brussels, Charlotte, Chicago, Dubai, Dublin, Frankfurt, Hong Kong, London, Madrid, Milan, New York, Paris, San Francisco, Säo Paulo, Singapore, Tokyo, Toronto and Zurich.

We also have strong links with our other

India, Latin America, Middle East, the Nordics and Russia.

Our projects are resourced centrally so that transaction teams are comprised of individuals with relevant experience and recent credentials, regardless of location.

We have people with extensive transaction experience in:


Insurance

Asset management

services

practices are is able to provide market leading advice in the following areas:

Strategic transaction advice

Commercial advisory

Transaction support

Valuations and business modeling

Operational transaction services

Transaction tax

Transaction real estate

Restructuring and distressed assets

Data analysis

Balance sheet optimization

Loan portfolio solutions

EMEIA


++1 212 773 1797 [email protected]











Accra Melbourne

Amsterdam Mexico City

Athens Milan

Atlanta Montevideo

Baltimore Montreal

Bangkok Moscow

Boston Mumbai

Brussels Munich

Buenos Aires Nairobi

Cairo New York

Cape Town Oslo

Charlotte Panama City

Chicago Paris

Cologne Port Louis

Copenhagen Prague

Dar es Salaam Quito

Doha Riga

Dubai Riyadh

Dublin Rome

Frankfurt San Francisco

Hamburg Santiago

Hanoi São Paulo

Helsinki Seoul

Hong Kong Singapore

Istanbul

Jakarta Stockholm

Johannesburg Stuttgart

Kuala Lumpur Sydney

Lagos Tokyo

Lisbon Toronto

London Vilnius

Los Angeles Warsaw

Luxembourg City Washington, D.C.

Madrid Wellington

Manama Zagreb

Manila Zurich


EY | Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

© 2013 EYGM Limited. All Rights Reserved.

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1373074.indd (UK) 08/13. Artwork by Creative Services Group Design.

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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

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