Europe's post-GFC leaner and better-capitalised banks are put to the test by the COVID-19 pandemic
Banks with stronger balance sheets capitalise on M&A opportunities amidst COVID-19 market turmoil, while their weaker peers consolidate to survive.
The COVID-19 pandemic has ravaged the European financial services sector, sending shockwaves across the FIG M&A landscape. It is no surprise that M&A volumes have plummeted. Yo-yoing valuations, buyer conservatism and the promise of "cheaper" stressed / distressed opportunities have compounded a cavernous rift between seller and buyer expectations. Reality is slowly sinking in—as the possibility of a v-shaped economic recovery becomes increasingly bleak, concern is growing around whether IFRS 9 loss estimation is much more than educated guesswork.
But all is not lost. The resilience of established financial institutions, fortified in the decade since the global financial crisis, agility afforded by digitalisation and evolution of customer interaction with financial services have contributed to M&A hotspots which burn bright amidst market gloom.
In this edition, we hone in on those hotspots and highlight the key 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 2020 and beyond.
Key highlights from H2 2019 include the following:
H1 2020 heralds an entirely new era for fintech, a market segment which scarcely existed at the time of the global financial crisis. Many founders and investors, who have enjoyed a bull run since 2015, have had their first taste of the bear markets which banks endured in the years following 2008.
Financial Institutions M&A sector trends: Specialty finance/marketplace Lending — H1 2020 and outlook for H2 2020
Panacea or plague—-what will the true impact of accreditation for government-backed COVID-19 loan schemes be?
M&A is likely to remain relatively flat in the shortterm as the true impact of COVID-19 governmentbacked loan schemes is assessed by specialty finance businesses, financial sponsors and public market investors alike
The UK Government launched a first-of-its-kind £250 million co-investment matching scheme, the Future Fund. Promising UK start-ups, many of which are specialty finance businesses, are able to relieve COVID-19 strain by securing up to £5 million in government loans, as long as the amount is matched by private sector investors. These loans can then be repaid, or converted into equity at a discount at the next funding round or after 3 years
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