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Financial institutions M&A: Sector trends - September 2021

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September 2021

We highlight the key European M&A trends in the first half of 2021, and provide our insights into the outlook for M&A moving forward.

Introduction

As COVID-19 lockdowns and travel bans across Europe end, so too does the hiatus of European financial services M&A. With M&A surging to levels not seen since the fabled heyday of the 1990s, 2021 promises a bull market of extraordinary proportions.

In this edition, bring you the key deal highlights and M&A trends across Europe and the UK. Focusing on Banks, Fintech and Other Financial Services, we also provide our insights on the outlook for M&A in H2 2021 and beyond. 

Key highlights from H1 2021 include the following:

  • Banks: As the COVID-19 hiatus of bank consolidation activity ends, European bank M&A 
    consolidation activity reaches unprecedented levels.
  • Fintech: E-commerce and online financial services experienced exponential growth during 
    the COVID-19 pandemic. The significance of digital offerings, and the RegTech
    tools to safeguard institutions and customers, has never been more apparent. 
    Europe's unicorns are at full gallop towards the digital future.
  • Asset/Wealth Management: Market consolidation continues at a feverish pace. The UK tops the 
    leader board, notching up 17 noteworthy deals in H1 2021
  • Payments: The COVID-19 pandemic drove e-commerce to levels never seen 
    before—payment rail, service and solution providers responded with 
    an unprecedented flurry of M&A activity
  • Stock Exchanges/Clearing Houses/Trading Venues: Global FMI juggernauts snatch up fund platforms, trading venues 
    and data analytics providers, under the increasingly vigilant gaze of 
    European competition authorities
  • Brokers/Corporate Finance: Financial advisers turn to M&A to deliver additional bandwidth, 
    capability and resources to ride the post-lockdown M&A tidal wave
  • Consumer Finance: Hyper-specialisation of the European consumer finance market 
    continues, with POS, entrepreneur, freelancer, migrant and payroll 
    finance businesses securing growth capital in H1 2021
  • Specialty Finance/Marketplace Lending: M&A levels dipped in H1 2021. Whilst institutional banks backed 
    trade and B2B finance platforms and VC supported P2P, SME and 
    treasury finance disruptors, both investor categories required 
    convincing to part with cash

M&A Forecast legend

European financial services M&A trends

Domestic banking champions across Europe merge, blinking into the sunlight

As the COVID-19 hiatus of bank consolidation activity ends, European bank M&A consolidation activity reaches unprecedented levels.

pillar

Europe’s unicorns come of age—COVID-19 lockdowns drive customer familiarity, utilisation and reliance on fintech

E-commerce and online financial services experienced exponential growth during the COVID-19 pandemic. The significance of digital offerings, and the RegTech tools to safeguard institutions and customers, has never been more apparent. Europe’s unicorns are at full gallop towards the digital future.

unicorn statue

Asset/Wealth Management

Market consolidation continues at a feverish pace. The UK tops the leader board, notching up 17 noteworthy deals in H1 2021

stock market

Payments

The COVID-19 pandemic drove e-commerce to levels never seen before—payment rail, service and solution providers responded with an unprecedented flurry of M&A activity

vault

Stock Exchanges/Trading Venues

Global FMI juggernauts snatch up fund platforms, trading venues and data analytics providers, under the increasingly vigilant gaze of European competition authorities

stock market

Brokers/Corporate Finance

Financial advisers turn to M&A to deliver additional bandwidth, capability and resources to ride the post-lockdown M&A tidal wave

stock market

Consumer Finance

Hyper-specialisation of the European consumer finance market continues, with POS, entrepreneur, freelancer, migrant and payroll finance businesses securing growth capital in H1 2021

unicorn statue

Specialty Finance/ Marketplace Lending

M&A levels dipped in H1 2021. Whilst institutional banks backed trade and B2B finance platforms and VC supported P2P, SME and treasury finance disruptors, both investor categories required convincing to part with cash

vault
stock market

Financial institutions M&A: Stock Exchanges/Trading Venues

Financial institutions M&A sector trends: stock exchanges/trading venues — H1 2021 and outlook for H2 2021

Insight
|
3 min read

Global FMI juggernauts snatch up fund platforms, trading venues and data analytics providers, under the increasingly vigilant gaze of European competition authorities.

 

Overview

CURRENT MARKET

  • Uptick in M&A activity

WE ARE SEEING

  • Global FMI giants expand horizontally:
    • Through acquisitions (e.g., Euronext's acquisition of Borsa Italiana and Tinkoff's acquisition of minority stake in Saint Petersburg Exchange)
    • Through JVs (e.g., CME Group's post-trade services JV with IHS Markit)
  • Search for alternative revenue opportunities through vertical integration
  • European leaders battle tech specialists in the data analytics arena (e.g., Infront's acquisition of Oslo Market Solutions)

KEY DRIVERS/CHALLENGES

  • Global FMI giants focus vertical integration firepower on:
    • Fund platforms (e.g., Deutsche Börse's acquisition of 48.8% of Clearstream Fund Centre and Euroclear's acquisition of MFEX Group)
    • Trading platforms (e.g., Johannesburg Stock Exchange's acquisition of Link Market Services South Africa)
    • Data analytics (e.g., Luxembourg Stock Exchange's acquisition of 22.8% of Tetrao and London Stock Exchange's acquisition of Refinitiv)
  • Differing investor prerogatives:
    • Loading up on liquid assets (e.g., VTB's acquisition of 5.77% of Saint Petersburg Exchange and Intesa Sanpaolo's acquisition of 1.31% of Euronext)
    • Offloading of non-core liquid assets (e.g., NPS RTS Association's disposal of 5% of Saint Petersburg Exchange)

TRENDS TO WATCH

  • Increasing scrutiny of vertical FMI deals by UK and European competition authorities:
    • IHS Markit's disposal of Oil Price Information Services and Coal, Metals and Mining businesses to facilitate S&P Global & IHS Markit merger
    • London Stock Exchange's disposal of Borsa Italiana to facilitate acquisition of Refinitiv
  • London Stock Exchange and Euronext go head-to-head to attract European SPAC listings

OUR M&A FORECAST

Horizontal expansion to remain opportunistic and under close scrutiny of European competition authorities. Uptick in vertical diversification deals as global FMI players flex M&A muscle to remain competitive.

 

Stock Exchanges/Trading Venues—Publicly reported deals & situations

Inorganic growth

LSE has had its strongest start since 2006. There were 11 IPOs raising £3.24 billion in between the start of 2021 and 24 February 2021. Financial News (March 2021)

Amsterdam surpassed London as Europe's largest share trading centre since Brexit, with an average €9.2 billion shares a day traded on Euronext. Financial Times (February 2021)

London's financial sector started to feel the full effects of Brexit on the first trading day of 2021 as nearly €6 billion of EU share dealing shifted away from the City to facilities in European capitals. Financial Times (January 2021)

Acquisitions:

  • Johannesburg Stock Exchange (Trading platform): Acquisition of Link Market Services South Africa (June 2021)
  • Deutsche Börse (Crypto trading and digital asset custody): Acquisition of majority stake in Crypto Finance (June 2021)
  • Tinkoff Group (Stock exchange): Acquisition of minority stake in Saint Petersburg Exchange (June 2021)
  • Moscow Exchange (Financial marketplace): Acquisition of 70% of INGURU (May 2021)
  • Deutsche Börse (Fund platform): Acquisition of 48.8% of Clearstream Fund Centre (May 2021)
  • Nxchange (DLT trading platform): Acquisition of Bondex (May 2021)
  • Euronext (Stock exchange): Acquisition of Borsa Italiana (April 2021)
  • Bourse Direct (Asset management): Acquisition of Arobas Finance (March 2021)
  • Euroclear (Fund platform): Acquisition of MFEX Group (March 2021)
  • Deutsche Börse 
    (Proxy advisory):
     
    Acquisition of 81% of Institutional Shareholder Services (February 2021)
  • Luxembourg Stock Exchange (Data analytics): 
    Acquisition of 22.8% of Tetrao (January 2021)
  • London Stock Exchange 
    (Data analytics):
     
    Acquisition of Refinitiv (January 2021)

JVs:

  • CME Group (Trading operations): Post-trade services JV with IHS Markit (January 2021)

 

Re-aligning footprint

  • Euronext (Asset management solutions): Disposal of Centevo (March 2021)

 

Loading up on/offloading of 'liquid' stakes

Loading-up:

  • VTB: Acquisition of 5.77% of Saint Petersburg Exchange (June 2021)
  • Intesa Sanpaolo: Acquisition of 1.31% of Euronext (April 2021)

Offloading:

  • NPS RTS Association: Disposal of 5% of Saint Petersburg Exchange (April 2021)

 

Searching for alternative revenues

  • Infront (Data solutions): Acquisition of Oslo Market Solutions (June 2021)
  • Johannesburg Stock Exchange (Trading platform): Participation in US$9 million Series A+ funding round for Globacap (February 2021)

 

Click here to download 'Financial services M&A reaches dizzying heights as COVID-19 lockdowns and travel bans come to an end' PDF

 

 

This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2021 White & Case LLP

 

 

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