Valuing financial services firms in a troubled economy

BVWireIssue #84-2
September 16, 2009

Thomson Reuters and the Association for Corporate Growth (ACG) report that, worldwide, the volume of total announced deals dropped 28% during the first three quarters of 2008, compared to the record-breaking first three quarters of 2007. “Interestingly,” notes Steven Levitt, co-founder of wealth management firm Park Sutton Advisors (New York City) in a recent special report to Business Valuation Update™, “of this total, M&A deals in the mid-market (under $500 million) fared better. Less reliant on the global credit markets, they declined only 16%, with a total value of $569.6 billion.”

Market pressure on assets under management (AUM) has complicated financial firm valuations: When AUM drops, profitability drops, translating to a decline in a firm’s value. “The number of firms at risk of failing has clearly increased,” Levitt says, “and some bottom-fishers, including numerous private equity groups, are on the prowl for bargain basement prices.” Valuations are particularly difficult when the sale discussions reach the later stages, requiring appraisers to make certain key assumptions and adjustments in their assessments.

If you include financial services firms among your clients, tune into “M&A and Valuation in the Financial Services Space in the Current Market” on Thursday.  The latest in BVR’s Industry Spotlight Serious, this 100-minute teleconference features Levitt along with fellow-experts Craig Jacobson, Clarke Locke, and Alan Schachter. Two CPE credits are available for listeners. For more information and to register, click here.
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