The Deal: Regulatory Hurdles Trip Up Specialty Finance Deals
NEW YORK (TheStreet) -- Dealmakers are reporting an increase in the size of specialty finance deals but warn regulatory resistance remains a crimp on activity, as several large firms -- including GE Capital and Banco Santander
Total deal value of $38.9 billion for the year to date in the specialty finance sector is far above $11.8 billion for the prior period, according to SNL Financial. This is despite a lower number of deals this year: 120 against 128 for the prior period.
Specialty finance comprises lending to a range of sectors such as airlines, shipping, technology, auto finance, credit cards and mortgage servicing rights. These companies typically serve consumers who fall outside the criteria of major banks and as such, charge higher interest rates.
Macquarie Capital senior managing director head of specialty finance Eric Hanson said the thesis that banks would seek higher margins through the acquisition of specialty finance companies had not come to full fruition.
"These businesses have outsized returns that banks would like to buy and while
Hanson pointed to a gap between buyer and seller expectations, with potential buyers still unwilling to pay high prices for many businesses after a rebound in valuations following the credit crisis. Where they had, this had contributed to higher deal values, he said.
"There have been