PE takes key role in financial services consolidation

Cinven bought Guardian, a life insurance provider that is closed to new business, from Aegon's UK arm as the company seeks to refocus and divest non-core assets. The life assurer will form the first building block for a new consolidation project in closed life insurance books - known as zombie funds. The move marks another major step in a growing trend among private equity groups to buy up and consolidate businesses in European financial services.

The UK is not the only country seeing this sort of activity. For example, Spain's banking sector has seen a number of attempts by private equity players to acquire assets. After European Union stress testing exposed weaknesses in many of the country's regional banks however, the government formulated plans to consolidate the sector.

JC Flowers in particular has been keen to become involved in Spanish banking, taking an interest in both Caja de Ahorros del Mediterraneo and Banca Civica, though it failed to come to an agreement with either bank. The investor has also placed a first-round bid for Banco Mare Nostrum (BMN) - recently created from the merger of a number of regional banks - though BMN has this week advanced plans to launch an IPO. JC Flowers has also placed a bid in the latest attempt to sell of beleaguered British mortgage lender Northern Rock. German financial firms have also attracted private equity interest, with Apollo currently in talks with Westimmo, while RHJ International is thought to be looking at BHF.

Consolidation in the sector is largely a hangover from the 2008 financial crisis when many banks were forced to seek government assistance in the wake of the collapse of Lehman Brothers. To prevent these banks obtaining an unfair political advantage many have been told to sell off non-core assets, presenting obvious targets for private equity investors.

But beyond banking, other financial services groups are also looking to slim down their operations. Many firms across investments, insurance and banking overstretched themselves during the boom years in the middle of the last decade, and are now looking to sell off non-core businesses to focus their business and become more efficient. Caspar Berendsen, partner at Cinven, says "there's a lot of pressure on financial services companies from new regulations, like Solvency II, and falling earnings. As a result, many are looking to move out of the life industry."

With many finance firms currently in talks with private equity bidders to sell parts of their businesses and a new round of economic problems facing the industry, unquote" expects more financial services companies to be the subject of buyouts in the near future.

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• Topics
• UK / Ireland
• Southern Europe
• DACH
• France
• Nordics
• Benelux
• Financials
• Buyouts
• Cinven
• Buy-and-build