More than 48 percent of the 166 private banking and wealth management executives who responded to the KPMG survey say they are actively seeking mergers and acquisitions (M&A) targets, compared with just 18 percent of respondents a year earlier. Meanwhile, 44 percent of the 2007 respondents said they would agree to a deal if an appropriate opportunity presented itself. Only 8 percent of industry executives said M&A strategies are not in their growth plans.
"M&A strategies become very enticing because they allow institutions to expand their customer base through an acquisition, rather than having to cultivate new relationships organically, which can take a long time," said Sagarna. He added that post-merger integration will be key to generating value for investors as companies seek deals in countries other than their own.
The KPMG survey, conducted in 38 countries, found that more than one- quarter of the respondents expect to derive 50 percent or more of their growth from acquisitions over the next few years. And, 20 percent of respondents said they expected acquisitions over the next three years to add 21 percent or more to their assets under management.
"This study shows that M&A could be among the most important growth strategies in private banking in the short term," said Sagarna. He noted, meanwhile, that KPMG survey respondents said uncertain economic concerns could pose significant danger for smaller institutions, where fixed costs for complex IT systems, increased pressure to meet regulatory compliance initiatives, and the expensive competition to fill jobs with experienced wealth managers could mean trouble if global markets take a downturn.
"At the same time, if consumer markets remain strong enough to generate continued growth in the short-term, there will be little pressure on the smaller banks in this fragmented financial services sector to agree to an acquisition," Sagarna said. "What's more, continued positive results may give the smaller institutions high expectations of what a suitable price would be to enter a deal."
The study also showed other aggressive attitudes among survey respondents for M&A activity:
- One-third of respondents say that they plan to invest more than US$500 million in acquisitions over the next three years,
- Approximately 20 percent say they expect to invest more than US$1 billion in acquisitions over that same time frame.
- China, Russia, Eastern Europe, the Persian Gulf region, India and the United States offer the strongest growth potential, and,
- Respondents said they have made most recent acquisitions in the United States, the United Kingdom, the Middle East and Japan.
