According to a report by Willis Towers Watson and Mergermarket, in the first six months of the current year, insurance mergers and acquisitions increased to 37 billion euros globally. There have been a number of mega deals which culminated in the first half of the year being the highest since the financial crisis of 2008-09.
There were 14 deals in the industry which were more than over 500 million euros ($567.80 million) in the first half of 2018. But the report showed that the total number of deals qwas reduced to 84 deals which is the lowest in the industry since 2009.
One of the major reasons for the increase in the deals was the changing nature of business models which have been forced on to companies because of increased regulatory pressures which have forced companies to create new business models and because more of the insurance companies were attempting to get back to their core strategy.
Many of the companies also shedding flab by divesting those parts of their business that they feel are unwanted which means that a number of assets that are valuable are again on the market and up for sale, said the report. The report included completed deals with a value of at least $5 million.
Greater interest in insurance assets has been by record levels of inflow for private equity investors as cash reserves had reached as high as $1 trillion in 2017. That resulted in buyers getting into complex acquisition deals in 2018.
The British insurer esure was agreed to be bought in August by private equity firm Bain Capital for 1.21 billion pounds which brought an end to speculations that had been going on for two years, of the British company being a lucrative acquisition target for U.S. private equity firms.
In the US, a big role been played by the regulatory change, notes the report, even as companies in the country had received an immediate boost because of tax reforms at the end of the last previous tear.
“Debt continues to be cheap, and following the recent tax reforms, U.S. companies have been given a steroid kick. We will continue to see an active M&A market,” Managing Director at Willis Towers Watson Jack Gibson, said.
“It’s just a matter of paying the right price and overcoming the hurdles that have led to deals taking longer to consummate and perhaps driving the lower number of deals this year.”
British insurance company Jardine Lloyd Thompson was agreed to be bought in September by U.S. financial services group Marsh & McLennan Companies Inc in which the British firm was valued at about 4.3 billion pounds.
While highlighting the increase in investments from Asian companies, the report also said that global dealmaking could be impacted by political and economic uncertainty. There markets have been weary of Brexit ending up without any deal between eth EU and the UK and the trade war between the US and China.
(Adapted from Reuters.com)