U.S. banks and financial firms are waiting for more clarity about the ramifications of the Volcker Rule before they decide to divest hedge funds and private equity funds, according to a new report by PricewaterhouseCoopers.
The general sense is that large financial institutions will feel they must divest, but they are waiting to see the exact rules developed by federal regulators, John Mara, partner at PwC and co-author of the report, said in an interview.
Mr. Mara said those rules won't be fully established until 2012 or later.
The current M&A business is still “sluggish due to a large number of sellers still in a wait-and-see mode,” Mr. Mara said. “Financial institutions don't want to be too hasty.”
The transaction value of asset management M&A increased by 20% to $5.5 billion in 2010 when not including the BlackRock-BGI deal in 2009. That deal alone accounted for another $13.3 billion in transaction value in 2009.
Current M&A activity lags behind 2007, when $35 billion in deals were made, the report said.
