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Financial institutions M&A: Sector trends - February 2020

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February 2020

We highlight the key European M&A trends in the second half of 2019, and provide our insights into the outlook for M&A moving forward

Introduction

As the relationship between the bloc and the United Kingdom transitions into a new era, financial services M&A across the European landscape responds to the weight of change. Change heralds opportunity for some and disruption for others.

To bring you this 6th edition of our biannual European Financial Services M&A Trends reports, we have analysed more than 1,600 deal and situations announced in H2 2019, including many that White & Case has directly advised on.

In this edition, we analyse inorganic investment strategies and highlight the key M&A trends across Europe and the UK. Focusing on Banks, Fintech and Other Financial Services, we also provide Focusing on Banks, Fintech and Other Financial Services, we also provide our insights on the outlook for M&A in H1 2020 and beyond.

Key highlights from H2 2019 include the following:

  • Banks: Strategic M&A takes centre stage—we have seen 40 bank consolidation deals in H2 2019
  • Fintech: Availability of growth capital drives stratospheric investment levels, with London overtaking New York as the world’s #1 hub for fintech investments
  • Asset/Wealth Management: Industry consolidation continues at pace, spurred by MiFID II fee transparency requirements, rising operating costs and growing competition
  • Payments: Mega-deals, including Global Payments/Total System Services, Fidelity National/Worldpay and PayPal/iZettle, dominate headlines
  • Stock Exchanges/Clearing Houses/Trading Venues: The search for the world’s premier listing venue continues—data aggregation and analytics capabilities could set competitors apart?
  • Brokers/Corporate Finance: Household names turn to M&A as pressure mounts from fintechs offering commission-free trading services
  • Consumer Finance: Financial sponsors see opportunities to back new entrants targeting under-serviced customer segments, including gig economy workers and solopreneurs
  • Specialty Finance/Marketplace Lending: The UK Financial Conduct Authority’s new P2P rules add to pressures faced by UK platforms

fig m&a introduction

European financial services M&A trends

Re-shaping for the new decade

Entry into the new decade brings promise—banks finally have the tools to shake off the remaining shackles of the global financial crisis and embrace deal-making to re-shape for the future.

bank vault door

Unicorns trail-blaze the London financial services landscape

British thoroughbreds dominate the downs—London has overtaken New York as the world's #1 hub for fintech investments. Unicorns are not mythical creatures on City streets…

circuit board

Asset/Wealth Management

Industry consolidation continues at pace. Rigorous fee transparency requirements under MiFID II, rising operating costs and growing competition from WealthTech/robo-advisers are forcing managers to combine.

credit cards

Payments

Megadeals, including Global Payments/Total System Services, Fidelity National/Worldpay and PayPal/iZettle, have dominated headlines, but both deal values and volumes keep smiles on deal-makers' faces.

banknotes

Stock Exchanges/Clearing Houses/ Trading Venues

The search for the world's premier listing venue continues—could data aggregation and analytics set competitors apart?

safety deposit boxes

Brokers/Corporate Finance

Household names turn to M&A as market disruption from fintechs offering commission-free trading continues.

circuit board

Consumer Finance

Financial sponsors see opportunities to back new entrants targeting under-serviced customer segments, including gig economy workers and solopreneurs.

stock market display

Specialty Finance/Marketplace Lending

The UK Financial Conduct Authority's new P2P rules add to pressures faced by UK platforms.

Financial Institutions M&A: Sector trends - June 2019
circuit board

Brokers/Corporate Finance

Financial institutions M&A sector trends: brokers/corporate finance — H2 2019 and outlook for 2020

Insight
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5 min read

Household names turn to M&A as market disruption from fintechs offering commission-free trading continues.

 

Overview

Current market

  • Consistent; upward

We are seeing

  • Household names opt for growth through:
    • Inorganic strategies (e.g., Rothschild's acquisition of Livingstone's UK business and equity investment in Redburn)
    • Organic strategies (e.g., BAML's Emerging Growth & Regional Coverage division, UBS Private Capital Markets division and ICAP's Digital Asset Markets division)
  • Flurry of new entrants offering user-friendly online stock trading services (e.g., Lunar, Robinhood, Freetrade, Revolut, etc.)

Key drivers/challenges

  • Trade consolidators:
    • Experiencing declining revenues—pressure from unbundling of equity research costs under MiFID II, in already over-brokered financial centres
    • Seeking scale and scope/specialist industry expertise
  • High buyer appetite:
    • US investors leveraging strength of the US dollar (e.g., INTL FCStone's acquisition of Exotix)
    • Asian investors seeking diversification (e.g., Concordia's 49.9% stake in Stormharbour Securities and Bank of China's acquisition of Goodbody)
  • Pressure from commission-free trading offerings:
    • Availability of growth funding from financial sponsors (e.g., Draper Esprit's investment in Freetrade and Velocity Capital's investment in BUX)
    • Tech-savvy customers respond to user-friendly on-demand access to global markets

Trends to watch

  • Brokers going head-to-head with McKinsey, Bain and BCG in their search for new research customers
  • Recalibration of mid-market investment banking business models—focus on private capital solutions, industry/sector specialisms and online offerings 

Our M&A forecast

Market consolidation is likely to continue in the short term as brokers recalibrate their offerings to retain market share, in a sector beleaguered by transformational regulation, fintech disruption and unfavourable market conditions.

 

Publicly reported deals & situations

Buyer appetite

  • INTL FCStone: Acquisition of Exotix Partners (December 2019)
  • Concordia Financial Group: Acquisition of 49.9% of StormHarbour Securities (November 2019)
  • Bank of China: Acquisition of Goodbody Stockbrokers (November 2019)
  • Renta 4 Banco: Acquisition of BNP Paribas Personal Investors (September 2019)

 

Search for alternative revenue

Organic:

  • BAML: Launch of BAML Emerging Growth & Regional Coverage (July 2019)
  • UBS: Launch of UBS Private Capital Markets (July 2019)
  • ICAP: Launch of Digital Asset Markets (June 2019)

Inorganic:

  • Dierickx Leys: Acquisition of Lawaisse (December 2019)
  • TP ICAP: Acquisition of Louis Capital (December 2019)
  • flatex Bank: Acquisition of DeGiro (December 2019)
  • GTS: Acquisition of Barclays' equities automated options trading assets (December 2019)
  • BNP Paribas Securities Services: Acquisition of strategic stake in AssetMetrix (November 2019)
  • Houlihan Lokey: Acquisition of Fidentiis Capital (November 2019)
  • Rothschild: Acquisition of Livingstone's UK business (October 2019)
  • Arkios Italy: Acquisition of 51% of Integrae Sim (October 2019)
  • Banca Valsabbina: Acquisition of 26% of Integrae Sim (October 2019)
  • Rothschild: Acquisition of minority stake in Redburn (July 2019)

 

Mounting pressure:

  • Lunar (Online trading): Launch of online stock trading feature (December 2019)
  • Robinhood (Online trading): Launch of commission-free stock trading in the UK (November 2019)
  • Freetrade (Zero-commission stock trading): Successful US$15 million Series A funding round, led by Draper Esprit (October 2019)
  • Revolut (Mobile trading): Launch of commission-free stock trading (August 2019)
  • BUX (Mobile trading): Successful US$12.5 million Venture funding round, led by Velocity Capital and Holtzbrinck Ventures (June 2019)

 

Click here to download 'Financial services M&A finished strong in 2019 ' PDF

 

 

This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2020 White & Case LLP

 

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