EGRRCPA Redefining Financial Institution Regulations
The U.S. Federal Reserve Board is tailoring a proposal to implement the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). The plan would ensure stringent requirements for large financial institutions and reduction for those that fall under defined thresholds. EGRRCPA also includes an amendment to the Volcker Rule (Volcker 2.0) which would lift trading restrictions for midsize banks and ease compliance for larger banks.1
The Power of a Valuation Firm
Regulators and investors are seeking more transparency from private-equity firms with how they value their assets. In response, private-equity firms are turning to outside valuation consultants to help minimize the in-house burden of increased reporting. A global private-equity survey conducted by EY saw a 25% increase in the percentage of firms who outsource all, or part of their valuation processes from two years ago.2
All Powers M&A Deals
Decision makers in the financial services sector continue to focus heavily on Artificial intelligence (AI). According to a study conducted by PwC, 52% of financial services executives stated they are continuing to make substantial investments in AI. The total expected cost savings from AI is expected to be almost $450 billion by 2023. AI has not only increased M&A deal speed and accuracy but has also allowed humans to focus on right-brain capabilities.3
Evolving Management Consultant Industry
The Outsourced Chief Investment Officer (OCIO) model continued to evolve in 2019. Worldwide assets managed by OCIO providers has risen 4.7% to $1.82 trillion for the 12 months ended March 31st. In the U.S., OCIO managers recognized a 67.2% jump in outsourced assets under management. According to PwC, asset and wealth management M&A are on pace to set an annual record as total deal value through Q3 2019 was $13.7 billion.4
SECURE Leading the way for Consumer Annuities
The U.S. Senate's consideration of SECURE (Setting Every Community Up for Retirement Enhancement Act of 2019) would increase consumer access to annuities for distributions from defined contribution plans. If only 1% of the 55+ million 401(k) plan members holding more than $5.7 trillion in retirement assets takes advantage, it represents $57 billion in transferrable assets for annuity providers.5
US Global Insurance M&A Leads Globally
Globally, U.S. insurance M&A remained the most active geography in 2019. Within the life and annuity sector, the trend of divesting noncore business segments to focus on acquiring blocks of business for market leadership is likely to continue in 2020. Deloitte believes that global insurers can prepare for economic, interest rate, and financial market uncertainty by continuing to engage in M&A and divestitures.6
Group Benefit Service Lines Gaining Momentum
New York Life Insurance has agreed to pay $6.3 billion in an all cash deal for Cigna’s nonmedical insurance unit. The acquisition comes at a time when U.S. insurers have been striving to broaden their group-benefits business. Like other U.S. life insurers, New York Life has been searching for ways to expand its scope of business as industry core products have become less attractive due to low interest rates. The acquisition is expected to close in Q3 2020.7
Largest Transactions Closed
- SunTrust Banks, Inc.
- Truist Financial Corporation
- LegacyTexas Financial Group, Inc.
- Prosperity Bancshares, Inc.
- IDS Property Casualty Insurance Company
- Amfam, Inc.
- Applied Underwriters, Inc.
- Quadrant Management, Inc.
- Scotiabank de Puerto Rice, Inc.
- Oriental Bank
- The Landrum Company, Inc.
- Simmons First National Corporation
- DNB Financial Corporation, Inc.
- S&T Bancorp, Inc.
- Presidio Bank
- Heritage Bank of Commerce
- Stewardship Financial Corporation
- Columbia Financial, Inc.
This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.
EBIT - Earnings Before Interest and Taxes