Monte Preview: M&A mania to continue
Wednesday, 08 26 2015, Category: Insurance and Reinsurance, Country: World
Conditions are right for the current spree of mergers and acquisitions in the insurance industry to continue, with some interesting regional variations, writes Clyde & Co corporate insurance group global head Andrew Holderness.
With the market currently gripped by merger mania – barely a week seems to pass without news of another major transaction – there is real impetus in the market accompanied by an almost tangible sense of ‘buy or be bought’. This should not come as a surprise. What we are seeing in 2015 is an acceleration of the upturn in merger and acquisition (M&A) activity that started at the beginning of last year and is driven by a number of common factors.
The abundance of capital in the market, combined with cheap borrowing due to the on-going low interest rate environment, means there is no shortage of funds with which to finance transactions. Whereas this time last year we were seeing a preference for excess capital being deployed in share buybacks, the market has reached a tipping point where the prevailing sentiment is now directed towards deal activity that can deliver diversification, geographic reach and cost savings.
The search for growth remains paramount, especially for those whose domestic markets have stagnated. For those based in mature markets, Africa and Asia remain attractive. However, the next generation of global powerhouses is arriving from emerging economies; China’s Fosun and BTG Pactual of Brazil are just two of those that have been making significant moves into mature markets to acquire assets that can fuel their international growth ambitions.