Buyer demand driving private equity exits

Brit’s acquisition by financial services company Fairfax has highlighted the trend of increasing buyer demand facilitating private equity (PE) exits.

Private equity firms Apollo Global Management and CVC Capital, Brit’s two biggest shareholders, have accepted the bid.

Prakash Paran, partner and head of insurance at DLA Piper for EMEA, said: "This follows other high profile PE exists such as Bregal Capital’s successful sale in 2014 of Canopius to Sompo Japan Insurance and wider non-PE, strategic transactions such as the XL/Catlin deal.

“Other insurers are making moves after a significant period of restructuring - Aviva/Friends Life is a great example of this - and consolidation is likely to continue through 2015 and some of the deals may be catalysts that accelerate further merger & acquisition (M&A) activity.

Paran added that at the smaller end of the market, regulatory and capital requirements are driving some transactions. But, he adds, this is less of a drive for the larger deals which seem to be more driven by commercial and strategic reasons.

“There is still some regulatory uncertainty for the largest players with the possibility of evolving global regulation and capital standards and this may act as a drag on big ticket M&A activity,” he said.

“However, industry sources indicate that whilst transformational deals may be unlikely due to the shifting global regulatory landscape, there is now more certainty around Solvency II and a greater appetite to do deals, as large insurers can't hold fire forever when organic growth is slow due to falling premiums in some traditional product lines and markets, combined with low yield and low interest rates on the investment side."