European regulators’ openness to PE investors is presenting attractive banking sector opportunities, but such opportunities require careful regulatory planning and local issue navigation.
Ten years ago, a PE investment in a European bank would have been a rare occurrence. However, more recently, PE firms have deployed capital in the banking sector, encouraged by changing regulatory perceptions of PE bidders. Apollo, together with parallel investors, acquired the former German subsidiary of KBC Bank NV, which since then has completed several add-on acquisitions, kicking off a series of German bank deals. PE firms including Cerberus, JC Flowers, and Blackstone have also completed bank buyouts, as European regulators become more open to financial sponsors — a trend we see continuing in 2019.
What Is Driving European Bank Transactions?
Disposal requests from the European Commission — as a consequence of breaching subsidy regulations — and regulatory reform have produced deal opportunities. The emergence of new growth markets has drawn the interest of PE, underlined by Blackstone’s €1 billion deal for Baltic lender Luminor. New technology and digital products have also attracted interest, as demonstrated by Cerberus’ acquisition of French consumer business GE Money Bank. Further, control of non-performing loans has meant less unpredictable downside risk for acquirers, but potential upside through enhanced operational efficiency (e.g., adopting FinTech) and exploiting scalability (e.g., through consolidation). As ever, distressed situations also present opportunities.