Freeman & Co.

LLC

645 Fifth Avenue th 9 Floor New York, NY 10022 Phone: 212-830-6161 Fax: 212-265-4998

News Release
For Immediate Release

FREEMAN & CO. REPORTS THAT SLOW GROWTH AND REGULATORY ENVIRONMENT RESULT IN MIXED YEAR FOR FINANCIAL SERVICES M&A ACTIVITY NEW YORK, January 2, 2013 Financial services deal activity in 2012 was mixed as a result of sluggish economic growth and the implementation of financial services regulations. There were significant year-overyear variations in deal activity in each sub-sector. Transactions involving companies in the financial technology sector increased 27%; excluding transaction processing and banking systems, financial technology saw a 3% year-over-year increase Asset management and specialty finance were among the most active sub-sectors, with the number of transactions in each increasing 22% Insurance transactions registered a slight decrease of 4% Broker-dealer transaction value was essentially flat on the year, but the number of transactions decreased 27% year over year The largest decline in deal activity was in private equity-backed financial services transactions, down 49% from last year

The outlook for financial institutions is mixed in 2013. Financial institutions are adjusting to new regulations, and banks in Europe and the U.S. are in the process of bolstering their balance sheets to comply with Basel III requirements. Highly accommodative monetary policy by the Federal Reserve and European Central Bank will keep interest rates low. These low interest rates may modestly stimulate the economy, but financial institutions will continue to struggle with lower returns on assets. Further, fiscal austerity will reduce global economic growth. In Asia, the Chinese economy, despite slow growth in 2012, is likely to experience higher growth in 2013 as industrial production and retail sales have increased in the past few months. The impact of the current environment on financial services M&A will be threefold. First, banks and insurers are not likely to make major acquisitions. Second, banks and insurers are likely to divest non-core businesses, especially those incurring higher capital charges. Non-bank financial institutions are logical strategic acquirers for many of these businesses and should increase their acquisition activity. Lastly, middle market activity should be robust. says Eric Weber, Managing Director and COO of Freeman & Co. LLC.

KEY DRIVERS OF FUTURE M&A Looking ahead to 2013 and beyond, Freeman & Co. projects the following M&A drivers: Asset Management Diversification of larger alternative firms through M&A will continue, with increasing convergence of traditional and alternative strategies Opportunities exist for independent and privately-owned firms that seek distribution through larger platforms In 2013, we expect increased consolidation activity with middle-market firms seeking to enhance scale and margins, particularly in businesses that have struggled to grow organically

Broker-Dealer Firms in the securities industry have, for the most part, adjusted their business models to navigate the new regulatory environment that is a consequence of the implementation of Basel III and the DoddFrank Act The slowdown in M&A in 2011-2012 has come after a brief spike in activity following the financial crisis, as large firms merged and a number of smaller firms recapitalized or started up to fill the void in the market As the industry continues to stabilize, we expect a new round of consolidation as capacity is taken out of the lower end of the market and firms look to exit capital intensive businesses while continuing to expand their agency and fee-based businesses

Financial Technology Overall, middle market FinTech M&A is expected to remain steady and relatively strong into 2013 as strategic acquirers use accumulated cash to fund bolt-on acquisitions Both strategic and private equity buyers will continue to have a strong appetite for mobile payments and payment processing, driving deal activity in the transaction processing and banking systems sector Asset management and capital markets technology providers are actively pursuing bolt-on acquisition strategies to broaden their product offering for the front, middle and back office Exchange consolidation at the top end of the market may be heating up again and, in particular, the ICE/NYSE Euronext deal could spark a further round of exchange consolidation globally; additionally, larger exchange platforms may look to purchase middle market financial technology firms to broaden their product offerings

Insurance Insurance has remained fairly active throughout the financial crisis and subsequent recovery, but the focus of M&A activity has shifted slightly away from P&C to Life & Health. Life insurance transactions were more frequent due to large divestitures in the second half of 2012
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In addition to making divestitures in the face of changing regulatory environment, life insurance companies have also been actively selling off blocks of annuities Private equity activity in insurance companies has remained strong throughout 2012 most notably with Athene Groups (Apollo -backed) acquisition of Presidential Life Corp in July, Guggenheims $1.35bn acquisition of Sun Life Assurance and Athenes acquisition of Avivas US life and annuity businesses for $1.55bn

Specialty Finance Niche consumer lending is likely to remain the most active subsector, although concerns over the evolving scope of the Consumer Financial Protection Bureau weighed on acquirers entering the industry Mortgage banking and servicing are likely to continue to be active, with strategic acquirers buying both servicing and originations businesses Equipment leasing and asset-based lending are emerging as active sectors, attracting interest from both strategic acquirers and private equity funds A full-fledged M&A market for specialty finance companies will require commercial banks to renew their participation. Recent capital, regulatory and market valuation issues have kept most banks on the sidelines, with certain growth-oriented banks being the only exception

Private Equity Private equity deals involving financial institutions continue to experience the new normal environment of a modest number of smaller and mid-sized transactions An excess of uncommitted capital (dry powder) still exists, although as fundraising continues to decline that number will gradually deteriorate As the boom time funds raised in 2005-2008 mature, fund lives will have to be extended to make up for the lack of deal flow

2012 HIGHLIGHTS Asset Management The number of global asset management transaction increased 22% from 112 deals in 2011 to 137 deals in 2012 Asset management transactions announced in 2012 represented $1.36 trillion of assets under management, an increase of 6% over the 2011 figure of $1.28 trillion The number of mid-sized deals, with assets under management between $1 and $10 billion, increased to 94 in 2012 from 70 in 2011, a 34% increase In the U.S., there were 79 transactions in 2012, up 4% from 76 transactions in 2011

European transactions included 43 announced asset management transactions, up 8% from 40 transactions in 2011

Broker-Dealer The number of transactions fell to 214 in 2012 from 294 in full year 2011, a 27% decrease Total value of transactions was essentially flat with $13.8 billion in 2012 from $14.0 billion in 2011, a 1% decrease Deal activity in 2012 follows a steep drop off in broker-dealer deal activity since 2010 when the value of transactions was $53 billion for the full year

Financial Technology 2H12 M&A activity was up 13% from 1H12, with 171 deals vs. 151 deals in 1H12. For the full year, 2012 saw 322 deals vs. 253 in 2011 representing an increase of 27% driven almost entirely by growth in the transaction processing and banking systems sector Transaction processing and banking systems saw by far the largest increase in deal activity in 2012, with 120 deals vs. 57 in 2011; this was driven largely by payments technology companies, and in particular mobile payments; asset management technology and capital markets technology saw the second strongest growth, both up 21% in 2012 vs. 2011 Insurance technology saw a 22% decrease in deal volume in 2012, with 25 deals vs. 32 in 2011; financial business services also saw a 5% decline, with 61 deals in 2012 vs. 64 in 2011

Insurance The number of insurance transactions remained relatively steady compared to previous years, standing at 784 for 2012 after 815 transactions in 2011, a 4% decrease However, the total deal value of $66.8 billion in 2012, stands 16% below 2011 total deal value of $79.2 billion

Specialty Finance The total number of specialty finance transactions was 88 in 2012, versus 72 in 2011, for a 22% increase Concerns over regulatory uncertainty, and, in particular over the evolving scope of the Consumer Financial Protection Bureau, weighed on the sector

Private Equity The total number of private equity transactions (entry and exit) involving financial institutions was 82 in 2012 compared to 160 in 2011, a 49% decrease Total transaction value was $21.0 billion in 2012, down from $34.8 billion in 2011

Exits for private equity firms and secondary buyouts (sponsor-to-sponsor deals) highlight the top deals of the year, with 9 or 10 of the top deals in either category

About Freeman & Co. LLC Founded in 1991, Freeman & Co. is one of Wall Streets premier providers of independent advice to the financial services sector offering mergers and acquisitions and related advisory services, capital raising, strategic consulting and competitor benchmarking analysis. The firm is headquartered in New York City. For more information, visit www.freeman-co.com. # # # For a full copy of the report or further information please contact:

Eric C. Weber, CFA Managing Director & COO Freeman & Co. LLC +1 212 830 6162 eweber@freeman-co.com