More M&A Activity For Financial Institutions?

Regulatory reform could ultimately fuel merger and acquisition activity in the financial services sector. But, so far, the lack of clarity on the direction it will take has mostly just hindered deal making.

Still, observers expect there will be many opportunities for deals in 2010 due to continued depressed valuations, divestitures in the insurance sector and additional bank failures. There were 702 problem banks on the Federal Deposit Insurance Corp.'s watch list as of Dec. 31, for instance.

One major X-factor is the so-called Volcker rule, currently under consideration in the Senate. The controversial proposal would prompt divestitures from banks, since it requires them to exit the private equity and hedge fund businesses, as well as proprietary trading.

But the passage of such legislation is still being debated, which means it may not even be worth the time and effort to put a pitch book together on a potential deal.

"After one of its slowest years in recent memory, the financial services M&A market remains uncertain over the timing of the economy recovery and impact of proposed regulatory, healthcare and tax reform," according to a new report from PricewaterhouseCoopers.

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