The FS Sector takes centre stage.

Anacap Financial Partners recent announcement that it has raised over €500m to acquire more financial services businesses in Europe is another positive sign that the Financial Services sector, once overlooked by many in the Private Equity industry, is about to take centre stage. It is testament to Anacap’s proposition that is has been able to raise the funds in the current environment and a further indicator that Private Equity firms are pro-actively searching for bargains in the sector, as banks and other financial service product providers, keen to recover losses, sell assets.

 Joe Giannamore , MD of Anacap, said “the most profitable time for banking is between the middle of a recession and the early point of recovery. After that the margins are so squeezed that all the money is lost in the next recession.”

Private Equity is not however completely unfettered; regulatory hurdles still exist and the economic uncertainty that remains still tempers their activity. Despite these difficulties opportunities to acquire significant businesses in the sector, especially those that do not require regulatory oversight and significant capital, are around. We fully expect to see further activity on the acquisition front in the second half of this year and into 2010.

We anticipate 'buy and build' to play a large part in the future restructuring of the sectors 'service delivery’ processes.

Private equity investors with money to spend matched with financial institutions looking to offload 'non-core' assets, to raise cash and re-capitalise balance sheets that have been badly hit in the downturn, will generate multiple deals creating service companies with the scale to sell services to  the sector, competing primarily on the basis of cost efficiency.