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A major component of the overall U.S. economy,
the financial services industry is composed of three primary
sectors: banking, securities and insurance. Banking is the largest
sector in the industry and includes all depository institutions from
commercial banks and thrifts to credit unions. In their role as
financial intermediaries, banks use what they receive from
depositors to make loans. The securities sector consists of
securities brokers and dealers, investment banks and advisers and
stock exchanges. Together, these entities facilitate the flow of
funds from investors to companies and institutions seeking to
finance expansions or other projects. The insurance industry is
divided into two groups: life/health and property/casualty
companies. Many large insurers offer both property/casualty and
life/health insurance.
From late 2007, to early 2009, the financial sector experienced some
of the greatest volatility in recent memory. This period marked the
end of easy credit, the bursting of the housing bubble, and the
beginning of large write-downs and capital pressures at many
diversified financial services companies. However, the financial
sector did lead a broader market turnaround and stabilized in 2009
after underperforming in the stock market in 2008. Both consumer
finance and diversified financial companies continue to be cautious
of maintaining adequate capital levels, and are mindful of risk.
In 2008, 181 deals were announced valued at roughly $80.4 billion.
As of August 2009, 87 deals had been announced, valued at $1.07
billion. While the pace of consolidation moderated in 2007 and into
early 2008, acquisitions in consumer finance will continue as firms
look to improve efficiency through gaining scale and by the sale of
poorly performing business lines. Small-scale acquisitions of the
lending portfolios or niche businesses will be more common in the
future than huge, transformational deals, as companies strive to add
size and new product offerings to their organizations and will find
it more important than ever to have a diversified business model.
More generally, globalization continues to increase the pressures on
financial institutions to acquire scale. As competition in domestic
markets has intensified, financial services companies have looked to
build businesses overseas. Many financial service firms with
securities arms have moved into Europe, Latin America, and Asia, to
leverage and allocate more capital as the capital markets of these
continents continue to grow and develop more equity. Meeting the
needs of customers will continue to be a powerful impetus for U.S.
financial service companies to make acquisitions oversees, as will
the opportunity to build a local clientele in these foreign markets.
Larger financial companies are expected to continue to expand
internationally in order to benefit from faster-growing emerging
markets.
VRC has extensive experience within the financial services
industries. We provide a range of transactional, reporting and
advisory services through our member firms in the major money
centers worldwide. We have served clients involved in mergers,
acquisitions, divestitures, leveraged buyouts, recapitalizations,
restructurings, public and private financings, and other corporate
transactions.
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