FIG M&A Sector Trends - July 2022

Sector trends - July 2022: Brokers/Corporate Finance

UK & European Financial Services M&A: Sector trends H2 2021 | H1 2022 — Brokers/Corporate Finance

Insight
|
6 min read

Marginal improvement in investor sentiment for high-quality brokers, particularly across online brokerage, crypto trading and carbon credit trading.

 

Overview

Current Market

  • Relatively flat/limited growth 

We Are Seeing

  • Marginal improvement in investor sentiment for high-quality broker dealers from: 
    • Private equity backers (e.g., Bridgepoint's minority investment in ACT) 
    • Asset managers (e.g., Quercus' acquisition of Dom Inwestycyjny Xelion) 
    • Trade consolidators (e.g., Swissquote's acquisition of Keytrade) 
  • Established pan-European banks re-entering inorganic growth mode through: 
    • Acquisitions (e.g., BNP Paribas' acquisition of remaining 50% of Exane) 
    • Partnerships (e.g., BNP Paribas' issuer services JV with CACEIS) 
  • Online trading/investing platforms: 
    • Stockpiling growth capital (>5 funding rounds in past 12 months) 
    • Attaining critical mass and engaging in M&A (e.g., Robinhood's acquisition of Ziglu) 

Key Drivers/Challenges

  • Private equity sees growth opportunities for: 
    • Carbon credit trading (e.g., Bridgepoint's minority equity investment in ACT) 
    • Crypto currency trading (e.g., J.C. Flowers' acquisition of 30% of LMAX) 
  • Established banks favour: 
    • Online brokerage solutions (e.g., Erste's acquisition of Random Capital) 
    • Scale for capital markets solutions (e.g., Bank of Ireland's acquisition of Davy) 
    • Targeted growth in the US (e.g., Santander's acquisition of Amherst Pierpont) 
    • Dismantling historic partnerships (e.g., BNP Paribas' acquisition of Exane) 
  • Growth capital available for: 
    • Established online platforms (e.g., PrimaryBid's US$190 million Series C and Moonfare's US$125 million Series C) 
    • New market entrants (e.g., Shares' US$40 million Series A, Lightyear's US$8.5 million Series A and Peaks' €5 million fundraising) 

Trends to Watch

  • Prevalence of "acqui-hires" by established Ibs—discrete deals to secure specific HR expertise and client relationships 
  • Fertile ground for de-SPAC opportunities? 
    • Platforms take the plunge (e.g., eToro/SPAC FinTech Acquisition Corp. V and TradeStation/Quantum FinTech Acquisition Corporation) 
    • But stakes are high (e.g., Dune SPAC's legal action against TradeZero) 

 

Our M&A Forecast

Increasing consolidation in the online brokerage market, as customer sentiment coagulates within fewer trusted service providers. Strategic acquisitions by established Ibs of digital channels for product delivery.

 

Investor appetite

Deal highlight:

White & Case advised Gopher Investments on its acquisition of Finalto, the financial trading division of London Stock Exchange-listed Playtech.

Private equity:

  • Gopher Investments: Acquisition of Finalto (September 2021)
  • Bridgepoint: Minority investment in ACT Commodities Group (July 2021)

Asset managers: 

  • Quercus: Acquisition of Dom Inwestycyjny Xelion (November 2021)    

Market appetite:

  • Intermonte: €101.3 million AIM Italia IPO (October 2021)
  • Peel Hunt: £112 million AIM IPO (September 2021)

 

Quest for economies of scale & scope

Deal highlight:

White & Case advised France's Crédit Mutuel Arkéa on the disposal of Keytrade Bank Luxembourg, the online trading challenger bank, to Swissquote Bank.

Acquisitions:

  • Alantra (France): Acquisition of minority stake in Avolta Partners (April 2022)
  • Swissquote (Luxembourg): Acquisition of Keytrade Bank Luxembourg (January 2022)
  • Erste Group (Hungary): Acquisition of Random Capital (September 2021)
  • Bank of Ireland (Ireland): Acquisition of Davy (July 2021)
  • Santander (US): Acquisition of Amherst Pierpont Securities (July 2021)
  • BNP Paribas (France): Acquisition of remaining 50% of Exane (July 2021)

JVs: 

  • BNP Paribas Securities Services: Issuer services JV with CACEIS (March 2022)

 

Online trading/investing

Stockpiling growth capital:

  • Shares: Successful US$40 million Series A funding round led by Valar Ventures (March 2022)
  • PrimaryBid: Successful US$190 million Series C funding round led by SoftBank Vision Fund II (February 2022)
  • Moonfare: Successful US$125 million Series C funding round led by Insight Partners (November 2021) 
  • Lightyear: Successful US$8.5 million Series A funding round led by Mosaic Ventures (September 2021)
  • Peaks: Successful €5 million equity investment by Haerlem Capital and Rithmeester (September 2021)    

Acquisitions:

  • Robinhood: Acquisition of Ziglu (April 2022)
  • J.C. Flowers: Acquisition of 30% of LMAX Group (July 2021)

 

Crypto trading

  • Fung: Successful US$2.7 million pre-Seed funding round led by Global Founders Capital, Kingsway Capital, Kindred Capital and Karatage (June 2022)
  • Relai: Successful €2 million crowdfunding round (May 2022)
  • Elwood Technologies: Successful US$70 million Series A funding round led by Dawn Capital and Goldman Sachs (May 2022)
  • BVNK: Successful US$40 million Series A funding round led by Tiger Global (May 2022)
  • Coinhouse: Successful US$17 million Series B funding round led by True Global Ventures 4 Plus Fund (January 2022)
  • GCEX: US$4 million equity investment from True Global Ventures 4 Plus Fund (January 2022)
  • Structure Financial: Successful US$20 million Seed funding round led by Polychain Capital (December 2021)
  • BitOasis: Successful US$30 million Series B funding round led by Jump Capital and Wamda (October 2021)
  • Coinrule: Successful US$2.2 million Seed funding round led by Zilliqa Capital (September 2021)
  • Bitpanda: Successful US$263 million Series C funding round led by Valar Ventures (August 2021)

 

Digitalisation

  • United Fintech: Acquisition of 25% of Athena Systems (January 2022)

 

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