Financial Services
M&A activity has been led by agreements for technology and innovation, as competition for strategic market advantage continues to fuel mergers and acquisitions (M&A) across financial services (FS) sectors. As banks, insurance companies, and asset managers attempt to optimise cost structures, improve top-line growth, and increase efficiency and profitability, acquisitions and divestitures are projected to pick up steam in the coming months. As a result, dealmakers’ entire strategic rationale is heavily influenced by change.
Market View
- In contrast to previous economic crises, a strong buy-side is being led by a growing number of private equity (PE) investors as well as more motivated market actors, such as FS corporates, who are looking to engage in the recovery through M&A activity. This is resulting in a deal-making environment with numerous prospects for domestic and cross-border mergers, acquisitions, and divestitures.
- We expect portfolio redefinitions to be a key driver of M&A activity, in which large FS corporations find unprofitable or non-core business components to divest.
- In the financial services business, ESG standards are continuing to redefine risk management and value creation. The urge to acquire ESG assets and know-how is reflected in FS acquisitions centred on sustainability.
Market Outlook
The continuation of strategic partnerships, as well as ongoing consolidation, is anticipated to remain an important aspect of M&A activity.
Furthermore, we foresee more distressed M&A in the coming months as COVID-related relief programmes come to an end and the consequences for bank loan books and insurance company closed blocks become evident.
As a result of private equity's cash on hand and willingness to participate in the recovery's development phase, multiples and purchase prices are rising even faster, and many financial services companies will likely accelerate their transformational disposal activities.
