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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

Consumer Finance

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

Insight
|
4 min read

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

 

Overview

Current market

  • Flat

We are seeing

  • Partnerships are a common route to market (e.g., Simplex/OKCoin, SoYou/Bankia, etc.)
  • Financial sponsor-backed new market entrants (e.g., Portify, backed by Redalpine and Finiata)
  • The sun sets on UK payday lending—QuickQuid collapses into administration

Key drivers/challenges

  • Banks:
    • Brexit planning (e.g., Starling's new £/€ dual currency debit cards)
    • Retaining customer touch points (e.g., Bank of America's new digital debit card)
    • Fraud prevention (e.g., Deutsche Bank's Spanish 'motion code' partnership with Mastercard and Idemia)
  • Financial sponsors—market opportunity to:
    • Disrupt incumbents and control the customer experience (e.g., Uber Money's new debit and credit card offering)
    • Conquer new market segments (e.g., finance for the gig economy)
  • Payment providers—connecting digital assets to the 'real' world (e.g., Wordline's partnership with Bitcoin Suisse and Simplex's partnership with OKCoin)
  • The UK Financial Conduct Authority's interest rate caps have done their job of crippling megamargin lending

Trends to watch

  • Increasing appetite for new technologies to combat growing fraud risk
  • Competition from new entrants, providing consumer financing options to suit lifestyle options and needs

Our M&A forecast

Disruption across the European consumer finance market is likely to continue in the short term. M&A activity is likely to experience a marginal uptick as incumbents and alternative providers lock horns for customer connectivity.

 

Publicly reported deals & situations

Healthy investor appetite

Private equity/Venture capital:

  • Redalpine and Finiata: Participation in £7 million Series A funding round for Portify (December 2019)
  • Sarwa Capital: Consumer finance JV Premium Card (November 2019)
  • Deserve: Successful US$50 million Series C funding round, led by Goldman Sachs (November 2019)

Management:

  • PPRO Crosscard: Acquisition of Crosscard by existing PPRO investors (December 2019)

Strategic investors:

  • Agos Ducato: Acquisition of ProFamily (July 2019)
  • Cembra Money Bank: Acquisition of cashgate (July 2019)

Trade consolidators:

  • Paragon ID: Acquisition of Thames Technology (November 2019)

 

New entrants

  • Portify: Successful £7 million Series A funding round, led by Redalpine and Finiata (December 2019)
  • Uber: Launch of Uber Money debit and credit cards (October 2019)
  • Starling: Launch of £/€ dual currency debit cards (October 2019)
  • Crédit Agricole: Consumer financing JV, SoYou, with Bankia (October 2019)
  • National Bank of Kuwait: NFC-enabled credit card JV with Visa (June 2019)
  • Simplex: Debit/credit card US$ deposits JV with OKCoin (June 2019)
  • Amaiz: Launch of specialist lending service for 'solopreneurs' (June 2019)
  • Bank of America: Launch of digital debit card (June 2019)

 

Payday lenders—end of an era

  • QuickQuid: Collapse into administration (October 2019)

 

Combatting growing fraud risk

  • Deutsche Bank: Spanish 'motion code' card JV with Mastercard and Idemia (December 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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