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A default of Spain or Italy’s debt would be “catastrophic,” according to J. Christopher Flowers, founder of private-equity firm JC Flowers & Co.
“If Spain or Italy defaults or leaves the euro, it’s going be catastrophic, and the damage will be indescribable,” he said today in an interview at SuperReturn International conference in Berlin. “So for that reason, I hope and expect the euro zone will stick together.”
The firm is looking to buy financial-services companies including banks and insurers in the U.K., Ireland, Spain, Italy, France, Poland and Germany, he said.
“There will be significant consolidation in the banking industry in Europe and the process is being considerably accelerated by the crisis,” he said. “A cross-border merger of two big weak banks is unlikely to happen because they won’t like each other’s assets. But we may see the combination of two weak banks in the same country and strong banks taking over weak banks in the same country, or a strong bank buying a weak bank in another country.”
J.C. Flowers’s most recent fund closed in 2009 after raising $2.3 billion, according to London-based research firm Preqin. In October, the New York-based firm agreed to buy insurance broker Fidea NV from KBC Groep NV (KBC), the recipient of 7 billion euros ($9.3 billion) in Belgian rescue funds, for 243.6 million euros. The firm also invested in the U.K.’s Kent Reliance Building Society. Last year, it submitted a bid with Apollo Global Management LLC for Irish Life & Permanent Plc’s life assurance unit. The sale was suspended after bids were too low, the seller said.
“Timing is really tricky because of what will happen,” Flowers said. “You need to drive with two hands on the wheel because the situation here is just so dynamic. The U.S. is actually a more appealing market right now because it offers substantially better economic prospects. But it´s also a lot more competitive and there is not much for sale, while in Europe, there is a lot on offer, a lot of trouble.”
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