International Finance and Accounting Handbook

cross-selling efforts. At the same time, relatively small and focused firms have some-
times continued to prosper in each of the retail businesses, especially where they
have been able to provide superior service or client proximity while taking advantage
of outsourcing and strategic alliances where appropriate.
In wholesale financial services, similar links have emerged. Wholesale commer-
cial banking activities, such as syndicated lending and project financing, have often
been shifted toward a greater investment banking focus, while investment banking
firms have placed growing emphasis on developing institutional asset management
businesses in part to benefit from vertical integration and in part to gain some degree
of stability in a notoriously volatile industry.
Exhibit 2.7 shows the global volume of financial services restructuring through
merger and acquisition (M&A) activity from 1986 through 2001—roughly two thirds
of which occurred in the banking sector, one quarter in insurance, and the remainder
in asset management and investment banking.
Exhibit 2.8 indicates that the vast bulk of this activity occurred on an in-sector
basis. Worldwide, 78% of the dealflow (by value) was in-sector—85% in the United
States (where line-of-business restrictions existed for most of the period) and 76% in
Europe (where there were no such barriers). So cross-sector M&A deals, including
banking–insurance, were a small part of the picture—only 11.4% even in Europe,
home of bank assurance.
In addition to being largely in-sector, restructuring via M&A transactions was also
largely domestic, as Exhibit 2.9 shows. Worldwide in commercial banking, less than
23% (by value) was cross-border. Only 12.7% and 20.2% of the U.S. and European
banking dealflow, respectively, was cross-border (mostly European banks buying

2 • 16 GLOBALIZATION OF THE FINANCIAL SERVICES INDUSTRY

Exhibit 2.6. Multifunctional Financial Linkages.

SECURITIES ASSET MANAGEMENT

COMMERCIAL BANKING INSURANCE

Retail Whole-

sale

Life Non-

Life

Brokerage

Invest-

ment

Banking

Retail &

P.B.

Institu-

tional