EY defines specialty finance as any financing activity that takes place outside of the traditional banking system. Our analysis focuses on two distinct subsectors: consumer finance and commercial finance.
Specialty finance remains an active market for M&A with both private equity (PE) and strategic acquirers attracted to high-yield opportunities across the sector. Although high valuations make it difficult for PEs to compete, their appetite to acquire specialty finance businesses remains strong and is expected to increase as quality assets are identified and valuations normalize.
The US market will continue to attract foreign investment as a number of foreign financial institutions look for a less regulated entry point into the US market. The relative strength of the US economy, low interest rates in foreign countries, continued uncertainty in Europe (e.g., Brexit) and overall trends in global monetary policies are all factors that we expect will lead to an increase in the demand for US specialty finance businesses from foreign investors.
Banks are expected to become strong buyers of finance companies due to their advantage of a lower cost of capital. Recently, however, very few equipment finance deals were completed by banks.
Read the full outlook here.
EY legal contacts:
Francisco Aldavero – Private Equity Sector Leader Law
Zhong Lin – Automotive & Transportation Sector Leader Law
Roland Montfort – Consumer Products & Retail Sector Leader Law