Financial institutions M&A: How financial sponsors are changing the landscape in Europe | White & Case LLP International Law Firm, Global Law Practice

Financial institutions M&A: How financial sponsors are changing the landscape in Europe

Is current interest in financial services M&A a unique and temporary phase for financial sponsors or are they in it for the long haul?

Financial sponsor activity in European financial services M&A has never been stronger. According to Mergermaket, during the first ten months of 2015, private equity buyouts accounted for 20 percent of all European M&A activity in financial services, compared to just 4 percent in 2007. Financial sponsors are investing in financial services across Europe in a way that has never been seen before.

After the collapse of Lehman in 2008, financial institutions across Europe had to restructure their business models, focus on core businesses, sell off non-core divisions, rebuild balance sheets and adapt to a new regulatory environment and tougher capital adequacy requirements.

For financial sponsors, who pre-crisis were simply unable to compete against the synergies and cheap capital that global strategic players were able to bring to the M&A table, the fallout from the financial crisis has created the perfect storm of factors. As a result, financial sponsors have now emerged as significant players in European financial services M&A.

The fallout from the financial crisis has created the perfect storm of factors for financial sponsors.

To find out more, we polled the opinions of senior finance professionals operating across. Europe to explore how financial sponsors are taking advantage of new market conditions, what assets and geographies they find most attractive, what is driving this interest and how this trend is likely to develop.

The results of the survey show specific challenges that financial services businesses face in different regions in Europe, how the disruption caused by the burgeoning fintech industry is driving change and how financial sponsors are proving themselves highly adept at managing the complexity that comes with investing in financial institutions.

One thing is certain: while the interest in financial services M&A by financial sponsors is a new trend, it is very much here to stay.

Methodology

In August and September 2015, White & Case surveyed 50+ top level financial services professionals, including C-suite Executives, private equity partners, bankers and academics working in financial services across Europe. At the time of the survey, all respondents were actively involved in the financial services M&A arena. The survey comprised a combination of quantitative and qualitative questions and a series of interviews that were conducted over the telephone by appointment. All responses are anonymised and presented in aggregate.

  
  

Please follow the links below to read articles in our report, or read the full the report here.

 

Contents

A new alternative

Traditionally, private equity investors kept their distance from the financial services sector due in part to its complexity, high capital requirements and a heavily regulated environment. The banking collapse in 2008, however, redrew the M&A landscape in financial services and created a perfect storm of factors for financial sponsors who are now taking advantage of new market conditions to emerge as credible players in European financial services M&A.

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Up to the challenge: Investing in banks

Despite bleak growth prospects for banks after the global financial crisis, financial sponsors have embraced the opportunities the restructuring of the banking sector has provided, and have proven themselves adept at managing the complexity that comes with investing in banks.

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Fintech: The disruptive force for good

The disruption in the financial services industry caused by technological advances has created fertile ground for financial sponsors who excel at promoting innovation and investing in new, untested technologies.

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Don't believe the hype

Fiduciary assets may not be the most obviously attractive business units within financial services, but steady profits and the opportunity for consolidation are enough to keep financial sponsors interested.

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A pan-European opportunity

Many commentators consider that the growing trend of financial sponsor investment in financial services is limited to a handful of countries in Europe. Deal data, however, show that investors with an appetite for banks and other financial services assets have a wider geographical appetite.

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Outlook: What does the future hold?

Historically, financial sponsors approached financial services investments with caution. Since the financial crisis, however, things have changed, creating valuable opportunities for financial sponsors to invest in a sector that traditionally has been dominated by strategic players.

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Infographic: European FIG M&A in numbers

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Video: Financial sponsors driving change in financial services M&A

White & Case partners Roger Kiem and Gavin Weir discuss how financial sponsors are changing the landscape in financial institutions M&A.

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