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Financial institutions M&A: Sector trends - February 2020

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February 2020

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

Introduction

As the relationship between the bloc and the United Kingdom transitions into a new era, financial services M&A across the European landscape responds to the weight of change. Change heralds opportunity for some and disruption for others.

To bring you this 6th edition of our biannual European Financial Services M&A Trends reports, we have analysed more than 1,600 deal and situations announced in H2 2019, including many that White & Case has directly advised on.

In this edition, we analyse inorganic investment strategies and highlight the key M&A trends across Europe and the UK. Focusing on Banks, Fintech and Other Financial Services, we also provide Focusing on Banks, Fintech and Other Financial Services, we also provide our insights on the outlook for M&A in H1 2020 and beyond.

Key highlights from H2 2019 include the following:

  • Banks: Strategic M&A takes centre stage—we have seen 40 bank consolidation deals in H2 2019
  • Fintech: Availability of growth capital drives stratospheric investment levels, with London overtaking New York as the world’s #1 hub for fintech investments
  • Asset/Wealth Management: Industry consolidation continues at pace, spurred by MiFID II fee transparency requirements, rising operating costs and growing competition
  • Payments: Mega-deals, including Global Payments/Total System Services, Fidelity National/Worldpay and PayPal/iZettle, dominate headlines
  • Stock Exchanges/Clearing Houses/Trading Venues: The search for the world’s premier listing venue continues—data aggregation and analytics capabilities could set competitors apart?
  • Brokers/Corporate Finance: Household names turn to M&A as pressure mounts from fintechs offering commission-free trading services
  • Consumer Finance: Financial sponsors see opportunities to back new entrants targeting under-serviced customer segments, including gig economy workers and solopreneurs
  • Specialty Finance/Marketplace Lending: The UK Financial Conduct Authority’s new P2P rules add to pressures faced by UK platforms

fig m&a introduction

European financial services M&A trends

Re-shaping for the new decade

Entry into the new decade brings promise—banks finally have the tools to shake off the remaining shackles of the global financial crisis and embrace deal-making to re-shape for the future.

bank vault door

Unicorns trail-blaze the London financial services landscape

British thoroughbreds dominate the downs—London has overtaken New York as the world's #1 hub for fintech investments. Unicorns are not mythical creatures on City streets…

circuit board

Asset/Wealth Management

Industry consolidation continues at pace. Rigorous fee transparency requirements under MiFID II, rising operating costs and growing competition from WealthTech/robo-advisers are forcing managers to combine.

credit cards

Payments

Megadeals, including Global Payments/Total System Services, Fidelity National/Worldpay and PayPal/iZettle, have dominated headlines, but both deal values and volumes keep smiles on deal-makers' faces.

banknotes

Stock Exchanges/Clearing Houses/ Trading Venues

The search for the world's premier listing venue continues—could data aggregation and analytics set competitors apart?

safety deposit boxes

Brokers/Corporate Finance

Household names turn to M&A as market disruption from fintechs offering commission-free trading continues.

circuit board

Consumer Finance

Financial sponsors see opportunities to back new entrants targeting under-serviced customer segments, including gig economy workers and solopreneurs.

stock market display

Specialty Finance/Marketplace Lending

The UK Financial Conduct Authority's new P2P rules add to pressures faced by UK platforms.

Financial Institutions M&A: Sector trends - June 2019
safety deposit boxes

Stock Exchanges/Clearing Houses/ Trading Venues

Financial institutions M&A sector trends: stock exchanges/clearing houses/trading venues — H2 2019 and outlook for 2020

Insight
|
5 min read

The search for the world's premier listing venue continues—could data aggregation and analytics set competitors apart?

 

Overview

Current market

  • Consistent; high activity levels

We are seeing

  • Inorganic strategies:
    • Horizontal expansion (e.g., Euronext's acquisitions of Oslo Børs and 66% of Nord Pool)
    • Cooperation arrangements (e.g., Astana International Exchange's central securities JV with Nasdaq)
    • Vertical integration, with a particular focus on data aggregation and analytics (e.g., LSE's acquisition of Refinitiv and Moody's acquisition of RiskFirst)
    • Gas in the tank—IPOs (e.g., Tel Aviv Stock Exchange's 700 million shekels IPO)

Key drivers/challenges

  • Building international scale—Asia in-bound (e.g., HKEX's rebuffed bid for LSE)
  • Domestic consolidation (e.g., Tradegate Exchange's acquisition of Börse Berlin)
  • Impact of digitalisation:
    • Banks and fintechs offering trading venues in competition with 'traditional' exchanges—exchanges have turned to financial data as the new battle ground
    • Cautious acceptance of digital asset trading (e.g., Intercontinental Exchange's launch of bitcoin futures trading)
    • Need for digital asset custody solutions (e.g., Euronext's acquisition of 23.5% of Tokeny Solutions)
  • Growing confidence in outsourcing solutions (e.g., cloud services provided by Google to Deutsche Börse)

Trends to watch

  • Nationalistic attitudes and perceived market foreclosure apprehensions continuing to hinder mega deals (e.g., new Italian laws requiring potential bidders for Borsa Italiana to notify the Italian government of acquisition plans)
  • Possibility of smaller regional and domestic consolidation deals
  • Increasing regulatory scrutiny of pros vs. cons of concentration of information in the hands of the few 

Our M&A forecast

M&A to achieve scale is still high on agendas of many European exchanges. However, HKEX's rebuffed bid for LSE highlights the reluctance of shareholders to risk a high-profile aborted deal (regardless of promised benefits and synergies).

 

Publicly reported deals & situations

Inorganic growth

Deal highlight:

White & Case represented Tradegate Exchange and its shareholders, Deutsche Börse and Tradegate Wertpapierhandelsbank, on the acquisition of Börse Berlin

Acquisitions:

  • Cboe Global Markets: Acquisition of EuroCCP (December 2019)
  • Euronext: Acquisition of 66% of Nord Pool (December 2019)
  • Deutsche Börse: Acquisition of Nasdaq's NFX (November 2019)
  • Tradegate Exchange: Acquisition of Börse Berlin (October 2019)
  • Hong Kong Exchanges and Clearing: Bid for London Stock Exchange (September 2019)
  • Johannesburg Stock Exchange: Acquisition of 74.85% of Link Market Services South Africa (August 2019)
  • Euronext: Acquisition of 19.8% and 10% of Oslo Børs from DNB and KLP, respectively (June 2019)

IPOs:

  • Tel Aviv Stock Exchange: 700m shekels IPO on TASE (July 2019)

Horizontal cooperation:

  • Astana International Exchange: Central securities JV with Nasdaq Dubai (July 2019)
  • Albanian Securities Exchange and Vienna Stock Exchange: Market data distribution JV (June 2019)

 

The new battle ground— financial data

Organic:

  • Deutsche Börse: Launch of Qontigo (September 2019)

Inorganic:

  • Luxembourg Stock Exchange: Acquisition of 10% of Origin (December 2019)
  • Moody's: Acquisition of RiskFirst (July 2019)
  • Equistone Partners Europe: Acquisition of Moody's Analytics Knowledge Services business (July 2019)
  • London Stock Exchange: Acquisition of Refinitiv (July 2019)
  • Refinitiv: Data access JV with BattleFin (June 2019)

 

Digital world demands— outsourcings and bolt-ons

  • Deutsche Börse (Cloud solutions): Outsourced cloud services by Google (September 2019)
  • Euronext (Digital asset custody): Acquisition of 23.5% of Tokeny Solutions (July 2019)

 

Protectionism interferes with deal-making

  • Borsa Istanbul: Acquisition of 10% of Borsa Istanbul by Turkish Wealth Fund (December 2019)
  • Shanghai Stock Exchange: China's suspension of the Shanghai-London Stock Connect scheme (December 2019)
  • Warsaw Stock Exchange: Rumoured interest in Bratislava Stock Exchange (September 2019)
  • Borsa Italiana: New Italian law requiring foreign potential bidders to notify the Italian government of any acquisition plans (September 2019)

 

Click here to download 'Financial services M&A finished strong in 2019 ' PDF

 

 

This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2020 White & Case LLP

 

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