The road to recovery from the global financial crisis has been complex and challenging for financial institutions across Europe, with many still having some way yet to go
In 2017, the European financial services sector has weathered monumental political uncertainty as events in Spain challenge its constitution and financial ecosystem, Italy attempts to scale its €349 billion debt mountain and the UK's vote to leave the EU "becomes real". The uncertainty has been compounded by the shifting sands of financial regulation and the unprecedented eruption of new financial technology which promises to revolutionise, but also threatens to disrupt, the business models of even the most sophisticated and well-capitalised businesses.
Whilst the path ahead perhaps remains a daunting prospect for some, one thing is clear—successful implementation of inorganic business transformation strategies is a key solution for remaining competitive and winning market share.
With this in mind, in this report we analyse the key European M&A trends in 2017 spanning the main financial services subsectors, and offer insight into the 2018 outlook for M&A in each:
European financial services
M&A trends
Banks, on the back foot following the financial crisis, are finally making a calculated comeback to M&A as they start to focus on core geographies and business lines. With balance sheets strengthened and capital reserves being rebuilt, global banks are now better placed to focus on markets and product offerings they believe will deliver the most growth in 2018.
While rating agencies are beginning to show first signs of positive sentiment towards European banks, the shifting regulatory landscape continues to complicate M&A processes, making it challenging to find committed buyers. Against this backdrop, high levels of financial sponsor interest in stressed and distressed assets are a welcome source of new capital. Recovery is certainly possible, but not without significant uncertainty.
By Guy Potel
Established financial institutions are engaging with fintech as never before and are now active participants in fintech M&A. Private equity and venture capital appetite for transactions remains strong. Fintech dealmaking is booming as a consequence, and there is every indication that this will continue for some time yet.
By Gavin Weir
Megadeals in the asset management industry have been coming thick and fast: Standard Life's £3.8 billion tie-up with Aberdeen Asset Management, Amundi's €3.55 billion acquisition of Pioneer and Henderson and Janus Capital joining forces, to name but a few. Activity is likely to continue as MiFID II comes into force.
By James Greig
Technology and tougher regulation are reshaping the infrastructure the financial services industry relies on to function. The four pillars of financial market infrastructure: payment systems; trading platforms; financial benchmarks; and custodians are all unique in the trends that are influencing their M&A activity.
Dealmaking across the UK consumer credit landscape varies materially. While deal volume in the specialty finance and market place lending space continues to remain high, by contrast, M&A activity in the payday lending space is reserved for the few players who have weathered the Financial Conduct Authority’s interest rate caps and enforcement actions.
White & Case partner Patrick Sarch talks about some of the trends that will shape M&A activity across European financial services in 2018.
White & Case partner Guy Potel discusses why financial institutions are engaging with fintech as never before.
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With balance sheet repair largely behind them, global banks are now cautiously re‑emerging in competitive auctions
Banks, on the back foot following the financial crisis, are finally making a calculated comeback to M&A as they start to focus on core geographies and business lines. With balance sheets strengthened and capital reserves being rebuilt, global banks are now better placed to focus on markets and product offerings they believe will deliver the most growth in 2018.
Steady growth in M&A driven by ongoing non-core disposals, re-emergence of strategic M&A, continued interest from PE, and in-bound US and Chinese investment.
A number of banks exited divisions they deemed non-core in 2017: Barclays has sold its French retail and wealth management businesses, disposed of a 22 per cent stake in its Africa Group and exited its UK trust business. Société Générale has offloaded a 49 per cent stake in Fortune and a 15.42 per cent stake in Eurazeo and spun-off TBC Bank. UBS, HSBC, BNP Paribas and Deutsche Bank are among the other banks to have made similar strategic disposals.
Institutions are beginning to invest for growth and pursue strategically important deals. Goldman Sachs, J.P. Morgan, UBS and Citi have announced expansion plans in Saudi Arabia while BNP Paribas has acquired stakes in Italian credit insurer Cargeas Assicurazioni and Swedish consumer credit group SevenDay Finans.
Cross-border deals involving non-EU investors will continue in 2018. US investors—driven by stronger balance sheets—are likely to be active, taking advantage of the strengthening US$ and the loosening regulations.
A steady growth in M&A activity driven by factors including ongoing non-core disposal programmes, re‑emergence of strategic M&A (i.e., larger banks seeking to expand within newly selected core territories), in-bound US and Chinese investment, and continuing PE appetite.
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© 2017 White & Case LLP
