Partner Article

Merger and acquisition activity to increase in North East in 2015

Deloitte believes that 2015 will surpass 2014 in the growth of financial services mergers and acquisitions (M&A) activity, as the market consolidates in the face of incremental costs, squeezed margins and regulatory pressures.

2014 saw high levels of M&A activity across financial services nationally, which was reflected in the Yorkshire and North East region, including the acquisitions of Moneybarn by Provident Financial plc, HML by Computershare, and Shopacheck by RCapital.

The sector is in the middle of a sustained period of change; various factors are expected to give rise to opportunities in 2015 resulting in growth in M&A activity over and above 2014 levels.

These include ongoing regulatory developments, access to existing and new sources of capital, competitive pressure driven by creativity and innovation in new product offerings and technological developments, alongside the continued pressure on margins.

As a result of continued intense regulatory supervision and expansion of the FCA’s remit to cover the consumer credit sector, opportunities exist for businesses with strong internal controls and governance models that can position their business effectively to address changing regulatory requirements, identify the right targets for acquisition and have the capability and funding to undertake acquisitions.

Chris Wildsmith, Director in Financial Services, Corporate Finance in Leeds, added: “2014 was a year of landmark change for the consumer finance sector as regulatory responsibility transferred to the FCA. As many businesses have initially focused on working through the FCA approval process, 2015 will give management teams chance to take stock and identify opportunities for M&A-led growth.

The companies that will be best placed to take advantage of this will be those already demonstrating best practice in relation to the letter and spirit of regulatory requirements, as they will have the most to gain from increasing scale and more time to consider such opportunities.“

Partner in Financial Services at Deloitte in Yorkshire, Peter Birch, said: “For financial services businesses in Yorkshire and the North East, 2015 is likely to bring significant opportunities for M&A.

“Locally we have seen recent high profile transactions that indicate the willingness and ability of well-positioned businesses to diversify operations and add scale.

“In addition, regulatory pressures are likely to drive consolidation in the consumer credit sector in particular.

“These factors, together with interest from private equity in acquiring assets in Financial Services are likely to drive M&A in the sector over the course of 2015.”

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