Financial services investments keep pace in 2006(2)

The year 2006 saw private equity firms continue to target the financial services sector, according to a new report.

Private equity firms invested over $30 billion (€23 billion) in financial services companies in 2006 and completed a record number of deals, according to a report by US boutique investment bank Freeman & Co.

The study, which tracked the deal activity of 76 buyout firms worldwide, showed that 96 private equity deals were completed in the financial services sector in 2006, with a total value of $30.5 billion. This was more than the 81 deals completed in 2005, although the total value of deals was down slightly, from $38 billion. However, the total value still represents a substantial step-up from 2004, when the same firms invested just $14 billion in 67 transactions.

The figures show that financial services companies, which have previously been relatively unpopular with private equity investors, are now an increasingly attractive proposition.

Business services was the most popular area within the sector, accounting for over a third of all deals by value. 25 deals were completed for a total value of $12.5 billion, including Cerberus Capital Management’s $7.4 billion acquisition of GMAC, General Motors’ personal finance arm, and Hellman & Friedman’s $950 million deal for Gartmore, a UK-based asset manager. Financial technology businesses also proved popular, with 25 deals being completed for a total value of $3.2 billion.

Hellman & Friedman was also active in the insurance sector, joining forces with Warburg Pincus and GE Capital for the $2.4 billion start-up of insurance group Arch Capital.