_
More than two thirds (68%) of private equity houses plan to invest in the UK financial services market in the coming year, according to a Grant Thornton report.
But the survey of the 40 leading private equity investors also shows that forthcoming regulation has been cited as a major hindrance to investment.
The survey indicates that there is a renewed interest in private equity houses investing in financial services firms with 90% of respondents predicting increased private equity activity in this sector. Around 90% of respondents also believe that sell offs by banks of non-core assets, including insurance divisions, will be a continuing trend.
But Grant Thornton head of financial services Peter Allen said that while the survey shows renewed interest in the financial services sector, the appetite to invest is significantly lower than that shown in other sectors such as media and support services.
The survey also shows that regulation, including the proposed Solvency II directive, is one of the main concerns for private equity houses investing in the financial services industry.
Nearly two thirds (58%) of respondents rate regulation as a primary challenge, while 93% say this will be important in shaping private equity buyers’ appetite for financial services businesses.
Allen said: “While some private equity houses see regulation as a deal breaker, regulation can be seen as providing some attractive buyout opportunities. And indeed while regulation increases the cost of running a business, those businesses that do survive are stronger for it.”
“This study shows a renewed interest in the financial services sector yet we will have to wait and see whether the forthcoming regulation will indeed act as a hurdle to investment or indeed make the financial services sector far more robust and profitable.”
