Financial Services Rose By 15% In 2005, CEOs Look For Smaller Acquisitions, Mercer Report Finds

The global financial services industry grew by 15% in 2005 and the sector remains on track to triple in value within a decade, according to Mercer Oliver Wyman's ninth annual report on the "State of the Financial Services Industry," which

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The global financial services industry grew by 15% in 2005 and the sector remains on track to triple in value within a decade, according to Mercer Oliver Wyman’s ninth annual report on the “State of the Financial Services Industry,” which it presented at the World Economic Forum in Davos.

The report revealed that over three fifths of financial services CEOs expect an upturn in strategic, selective mergers and acquisitions activity this year and there has been a substantial shift towards new markets to provide opportunities for future growth. European CEOs in particular show a relatively high interest in cross-border acquisitions, as opportunities for consolidation in more mature markets become increasingly limited.

The analysis noted a widening gap between the performance of the best performing firms and those that are achieving market growth rates.

“A few consistent performers have broken away from the pack over the last five years and overturned the conventional wisdom that firms need to trade off short term performance against longer term strategic gains,” said John Drzik, president of Mercer Oliver Wyman. “These top-tier performers have achieved both.”

Mercer Oliver Wyman’s third annual poll of CEOs’ expectations and priorities indicates a consensus that the financial services sector will grow three times as quickly as the world economy next year.

CEOs surveyed for the report expect a strong market value increase of between 5% and 14% in 2006. As a consequence of the weaknesses of several established markets, around three quarters of the CEOs are increasingly focused on new markets to deliver revenue growth: in addition, the percentage of CEOs who plan to launch a major new business more than doubled from last year and two thirds of CEOs plan to introduce major product innovations.

The importance of strategic, selective acquisitions (domestic and cross-border) has increased significantly, with more than three fifths of CEOs now citing smaller acquisitions as a strategic priority. As a consequence of the lack of growth opportunities in their home markets, more European CEOs expect a cross-border acquisition compared to their North American peers, who are more focused on domestic deals.

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