FIG deals surge in 2011

Private equity investment in financial institution groups during the first six months of the year shot up roughly 39%, but lacked the larger deals of 2010, such as Advent's and Bain’s $3.2bn WorldPay deal.

Private equity investment in financial institution groups (FIG) increased significantly during the first half of 2011, with $14.9 billion invested, a 39 percent rise in deal value compared to the same period last year, according to research by US-based consulting firm Freeman & Co. The average transaction size among deals with disclosed deal values was roughly $309 million during the first six months of the year, up from about $223 million during the first half of 2010.

With many banks, insurance companies and other large financial institutions still needing to adapt to a changing regulatory environment, “additional carve out opportunities for [financial institution group] investors” still exist, according to the report, with an estimated $300 million or more of dry powder still waiting to be put to work.

New investments in the first half of the year were “strong”, Freeman & Co. managing director Eric Weber said in a statement, “but lacked the larger deals of 2010 such as IDC or RBS WorldPay. Overall, banks and insurers still hold many non-core businesses, which provides ample hunting grounds for PE firms to target over the next three years.”

In the asset management sub-sector, the number of transactions in 2011 will “easily exceed that of 2010”, the report said. The largest reported deal in the sector during the first half of 2011 was Lightyear Capital’s acquisition of Clarion Partners from ING Group for $100 million.

Several other private equity firms agreed transactions in the space during the period, including TA Associates, Rosemont Investment Partners and Stone Point Capital. Last month, Stone Point partnered with former president of Specialty Finance Group Jon Wright to form hospitality finance company Access Point Financial, which will provide financing to hotel brands in the US and expects to originate more than $1 billion of loans during its first three years

Freeman & Co. is an M&A advisory and strategic consulting firm focused on the financial services industry and was founded in 1991.