Some life insurance companies that have not seen themselves as being candidates for acquisitions may now be open to the idea, an industry consultant says.
Thanks to the beating insurers have taken during the recession, potential targets are looking at the idea of making a deal in a different light, says John Nigh, a managing principal in the New York office of Towers Perrin Forster & Crosby Inc.
But potential acquirers, and especially potential acquirers that have been seeking federal bailout funds, have been sitting on their money, Nigh says.
Still, Nigh expects to see the pace of mergers and acquisition pick up, perhaps as early as the fourth quarter of 2009.
The reason: The stock prices of publicly owned companies are depressed, often below statutory book value. That makes them more attractive to other companies, and companies that have shunned M&A suitors in the past are likely to see purchase offers as being more attractive, Nigh says.
As the economy improves, there will be more companies in a position to make acquisitions, and they will be under pressure to show top- and bottom-line growth, both organically and through acquisitions, Nigh says.
For now, the recession is keeping life industry M&A activity in check. When Towers Perrin researchers surveyed 24 life industry chief financial officers, they found that only 30% said their companies had acquired other companies during the previous 12 months, but that 50% said their companies may be interested in acquiring companies in the next 12 months.
