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Financial Institutions M&A: Sector trends - June 2019

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June 2019

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


As global fintech funding in Q1 2019 approaches US$6.3 billion, London is poised to rival San Francisco as stable to the highest number of unicorns.

Established European financial institutions have joined the fintech race, hoping to harness the promise of technology—a smooth, tailored and safe consumer experience, available everywhere and to everyone. However, innovation is expensive, absorbing valuable resources at a time of unresolved trade concerns, fragmented markets, political uncertainty and unknown Brexit impact.

Do fintechs justify such high valuation multiples? Can fintechs really deliver the seemingly endless possibilities? Would resources be better allocated elsewhere?

In this series of biannual reports, we analyse inorganic investment strategies and highlight the key M&A trends across Europe and the UK in H1 2019. Focusing on banks, fintech, and other financial services (i.e., asset/wealth management, market infrastructure, consumer finance and Specialty finance), we also provide our insights into the outlook for H2 2019 and beyond.

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European financial services
M&A trends

Consolidation continues at pace—mega-mergers on the horizon

The wait is over. Whispers of mega-deals have matured into agenda items for boards of many larger European banks.

Financial Institutions M&A: Sector trends - June 2019

Stampede of the unicorns

H1 2019 has seen European fintech M&A hit new heights. Fintechs have enjoyed funding support from established financial institutions, financial sponsors, sovereign wealth funds, data giants and family offices. The next 36 months will be pivotal in identifying fintechs which will revolutionise financial services

Financial Institutions M&A: Sector trends - June 2019

Asset/Wealth Management

Fallout from MiFID II continues to drive industry consolidation. In the last 6 months, there has been a glut of smaller deals, but a dearth of megamergers

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Rapid rise of mobile commerce, e-commerce, growing merchant/ consumer familiarity with non-bank providers and accessibility by under-banked communities are all driving demand for electronic payments. It is no surprise that M&A levels have reached stratospheric heights, and show little sign of descending


Stock exchanges/Clearing houses

Seeking multijurisdictional scale, as concerns around long-term viability of the independent stock exchange operational model continue to grow

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Brokers/Trading service providers

Market consolidation continues. MiFID II, sluggish capital markets, increasing operational overheads and over-brokered European financial centres drives M&A

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Credit cards/Consumer finance

Financial sponsors provide dry powder to new entrants seeking to disrupt existing card providers, 'level-up' in-store consumer finance solutions/experience and fill the void left by payday lenders

Financial Institutions M&A: Sector trends - June 2019

Specialty Finance/Marketplace lending

Trade consolidators dominate the M&A charts, seeking scale, vertical integration and opportunities to conquer their own niches

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Specialty finance/Marketplace lending

Financial institutions M&A sector trends: specialty finance/marketplace lending — H1 2019 and outlook for H2 2019

2 min read

Current market

Upward, marginal

We are seeing

  • Market consolidation across product lines
  • Foreign inbound M&A (particularly from US buyers)
  • Trade consolidators scooping up competitors

Key drivers

  • Expanding universe of potential investors:
    • Trade consolidators—seeking scale (e.g., Factris's acquisition of Debifo), vertical integration (e.g., Paylate's acquisition of AmmoPay) and opportunities to conquer their own niches (e.g., Morses Club's acquisition of Hays Credit)
    • Banks—lower cost of capital associated with specialty finance businesses
    • Foreign investors—expanding into new geographies and tapping into new customers (e.g., Brightlane Corp.'s acquisition of VATBRIDGE)
    • Financial sponsors—opportunity to capture an under-serviced market
    • Investment managers—attractiveness of captive platforms (e.g., Downing's acquisition of Funding Empire)
  • Pressure from rising default rates encouraging market players to pullulate organically or acquire superior credit assessment technology

Trends to watch

  • Differing regulatory prerogatives:
    • Consumers—safeguarding over market freedom (e.g., UK FCA's imposition of financial limits for UK investors' investment in P2P platforms)
    • SMEs—market freedom over safeguarding (e.g., UK Government's rejection of Treasury Select Committee's proposal to regulate SME wholesale lending market)

Our M&A forecast

Specialty finance providers are likely to continue to attract buyer interest, particularly from trade consolidators, financial sponsors and US buyers.


Other financial services—Publicly reported deals & situations


Market consolidation

47 specialty finance M&A deals announced in H2 2018*

  • Bank Frick: Acquisition of majority equity holding of Tradico (June 2019)
  • Brightlane Corp.: Acquisition of VATBRIDGE (April 2019)
  • Downing: Acquisition of Funding Empire (March 2019)
  • Morses Club: Acquisition of Hays Credit (February 2019)
  • Duke Royalty: Acquisition of Capital Step (February 2019)
  • Praetura Asset Finance: Acquisition of Kingsway Asset Finance (January 2019)
  • Factris: Acquisition of Debifo (January 2019)
  • Barclays: Minority equity investment in MarketInvoice (January 2019)


New entrants

  • Propio: Successful £375,000 equity crowdfunding raise (April 2019)


Growing pressure on P2Ps

  • Funding Circle: 55% revenue increase in FY2018, amidst 3.00%–3.8% expected loan default rate (January 2019)


Government/ Regulatory approach


  • UK FCA: Imposition of financial limits for UK investors' investment in P2P platforms, with effect from December 2019 (June 2019)


  • UK Government: Rejection of Treasury Select Committee's proposal to regulate SME wholesale lending market (January 2019)





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