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Funds News

Blackstone says market turmoil to last until 2010

LONDON (Reuters) - The financial markets are likely to see turmoil until 2010 as institutions struggle to understand its cause, Blackstone senior managing director John Studzinski said at the Reuters Hedge Funds and Private Equity Summit in London.

Blackstone senior managing director John Studzinski speaks during a Reuters Hedge Fund and Private Equity Summit in London April 8, 2008. The financial markets are likely to see turmoil until 2010 as institutions struggle to understand its cause, Studzinski said at the Reuters Hedge Funds and Private Equity Summit in London. REUTERS/Toby Melville (BRITAIN)

“This year is going to be fraught with data and denial,” Studzinski, who is global head of Blackstone’s mergers and acquisitions advisory group, said on Tuesday. “Next year a lot of industries are expecting difficulties, particularly more on the consumer side.”

Studzinski added that there is scope in 2009 for consolidation among financial institutions as banks that have suffered least in the credit crunch buy those that are most hurt.

“I don’t think there will be a lot of good bank/bad bank strong bank/weak bank mergers this year, because I think a lot of strong banks would be reluctant to merge with weak banks until they have better transparency,” he said.

“But next year should be a very strong year in terms of U.S. financial services consolidation, stronger versus weaker, and in selected markets: in the UK, possibly in Germany with the Landesbanks, or further consolidation in Italy.”

As a result, the market may not really be restructured until 2010, Studzinski said.

“You’re not going to be looking at any type of restructured market on the financial services side, or the lending side, emerging until maybe 2010 ... This (slowdown) is going to be more protracted than people perhaps wish it to be.”

Another area ripe for merger and acquisition activity is the healthcare sector, said Studzinski.

Such action may have already started: Novartis AG NOVN.VX on Monday agreed to buy Nestle SA's NESN.VX 25 percent stake in Alcon ACL.N for $11 billion (5.6 billion pounds) and has an option to acquire Nestle's remaining 52 percent stake for a further $28 billion.

“Consolidation in pharmaceuticals is long-overdue ... you are going to have more consolidation activity now, because the growth has slowed, and they need to grow revenue and profit.”

Studzinski joined the buyout giant in 2006 after developing a reputation as a rainmaker in senior investment banking positions at HSBC, where he worked from 2003 to 2006 and Morgan Stanley, where he spent 23 years starting in 1980.

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