See Table of Contents for Tiburon's FSI M&A Research Report Tiburon Strategic Advisors, a market research & strategy consulting firm serving a wide variety of financial institutions and investment managers, is pleased to announce the release of its new research report on Financial Services Institutions Mergers & Acquisitions. This research release summarizes some of the report's key findings. The purpose of this report is to provide readers with an initial understanding of the rapid consolidation taking place in the banking, brokerage, insurance, & asset management market segments. Over recent decades, Glass Steagall has fallen and the financial services industry has picked up its mergers & acquisitions trend. Banks have acquired other banks, brokerage firms, & asset managers. Insurance companies have acquired other insurance companies, independent broker/dealers, & asset managers. Full-service brokerage firms have acquired other full-service brokerage firms and asset managers. And asset managers have acquired one another. With all this activity, what is left? Lots! This report profiles the enormous number of transactions that have taken place and lays the groundwork for expected consolidation (and divestitures) over the coming decade. This is the second draft of Tiburon’s research on this topic. Tiburon’s first draft of this report was published in 2005; that draft consolidated prior Tiburon research into one report and outlined the framework for gathering more data. This is Tiburon’s second draft of this report; this draft includes a refined introduction, and more reader-friendly table of contents. This draft also coordinates this report with all of Tiburon’s other research reports, adding hundreds of new transactions, including those of Tiburon clients JP Morgan Chase, New York Life, Sutton Place Associates, & The Bank of New York Mellon Corporation. Key Findings This report has a long list of interesting facts to share: Evolution of Financial Services Institutions Mergers & Acquisitions This chapter outlines the evolution of mergers & acquisitions of financial services institutions: Market History Almost half of retail banks failed in the 1929 stock market collapse The Glass Steagall Act was adopted in 1933 and was officially called the Banking Act of 1933, preventing retail banks from underwriting stocks & bonds The Bank Holding Company Act was established in 1956, which further restricted banks and took them out of the insurance industry The Big Eight CPA firms consolidated to become the Big Four between 1989 and 2002 Citicorp and Travelers merged in 1998 to form Citigroup, requiring a change in Glass Steagall or a major restructuring The Bank of America Corporation acquired US Trust from the Charles Schwab Corporation in 2007 Market Definition There have been 15,000 financial services institutions mergers & acquisitions and another 6,000 related mergers & acquisitions for a total of 21,000 cumulative industry transactions Market Growth There are almost 9,500 cumulative mergers & acquisitions each year, an increase almost 50% since 2003 There are nearly 1,000 financial service industry cumulative mergers & acquisitions, up 400% since 1985 to 1989 Financial services institutions cumulative mergers & acquisitions valuations are $11 trillion, up almost 300% since 2003 but down 10% since 2006 Market Segmentation This section explains the market segmentation of the fee-accounts industry: Retail banks & insurance companies have acquired over 40 securities firms, 40 of the top 50 independent broker/dealers, and numerous asset management companies Retail Bank Acquirers The valuation of retail bank acquisitions increased to its high of $180 billion in 2004, but decreased to $61 billion in 2007 Retail banks spent more than $40 billion acquiring investment banks Full-Service Brokerage Firm Acquirers The number of brokerage firms has decreased since 2002 to just below 5,500 Insurance Company Acquirers There are 330 insurance company acquisitions of other insurance companies, up 40% since 1990 but down from the 1996 peak The average valuation of insurance companies acquisitions has been declining since 2001 to $68 million The number of life insurance company acquisitions has risen to 51 per year, up 500% from 11 to 14 in 1985 to 1994 The average valuation of life insurance companies acquisitions has reached $647 million, up 900% since 1985 and 100% since 1995 to 1997 The numbers of insurance companies acquiring asset managers have been relatively low, at just 3 to 14 each year The average valuation of insurance company acquisitions of asset managers has dropped to $19 million from its high in 2005 at $425 million Asset Manager Acquirers The aggregate valuation of asset manager transactions is $17 billion, up 300% since 1981 but down 900% since 2000 Asset manager earnings multiples are quite strong at 111x Mutual fund price-to-assets under management valuations are the highest compared to private client and institutional asset managers One-quarter of asset managers have done an acquisition in the past three years The client retention rate after asset management deals averages around 90% Foreign Financial Institution Acquirers There are 21 foreign financial institutions acquisitions of retail banks, up 300% since 2001 The aggregate valuation of foreign financial institutions acquisition of retail banks is $83 billion, up 20% since 2001 The number of foreign financial institutions acquiring insurance companies increased to 26 in 2007 from 19 in 2006 Foreign financial institutions acquisitions of insurance companies average valuations dropped to $391 million in 2007 from its high in 2003 at $640 million The number of foreign financial institutions acquiring asset managers firms increased 60% since 2006 to 23 deals Foreign financial institutions acquisition valuations of asset managers jumped to its high of $94 billion in 2007, after four stagnant years Future Predictions for Financial Services Institutions Mergers & Acquisitions This section outlines the future predictions for financial services institutions mergers & acquisitions: Increase in Mergers & Acquisitions Activity The number of mergers & acquisitions will increase to 9,750 by 2013 Mergers & acquisitions valuations will decrease to $1,050 billion as larger firms take advantage of purchasing smaller firms at a discount The number of financial services company mergers & acquisitions will slowly increase and eventually level off to 1,045 by 2013 The Emergence of the Retail Banks, Insurance Companies, & Foreign Financial Institutions Acquirer Models By 2013, the number of the largest banks may increase to 95 while the number of the smallest banks may decrease to 1,483 To better understand the developments for FSI M&A, executives can purchase Tiburon's An Initial Overview of Financial Services Institutions Mergers & Acquisitions: Consolidation of the Banking, Brokerage, Insurance, & Asset Management Industries research report where the key findings highlighted above are covered in greater detail. Please contact Sarah Sage at SSage@TiburonAdvisors.Com or 415-789-2540.