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Financial institutions M&A: Sector trends - September 2021
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Financial institutions M&A: Brokers/Corporate Finance

Financial institutions M&A sector trends: brokers/corporate finance — H1 2021 and outlook for H2 2021

Financial advisers turn to M&A to deliver additional bandwidth, capability and resources to ride the post-lockdown M&A tidal wave.

 

Overview

CURRENT MARKET

  • Consistently active

WE ARE SEEING

  • Market consolidation to increase bandwidth and capacity:
    • Through acquisitions (e.g., Investec’s acquisition of minority stake in Capital mind)
    • Through partnerships (e.g., Peel Hunt’s investment banking JV with Santander)
  • Gravitation to online and crypto trading during COVID-19 lockdowns
  • Trading tech providers bulk up:
    • Financial market communications (e.g., Symphony’s acquisition of Cloud9 Technologies)
    • Order management customisation (e.g., ION’s acquisition of Dash Financial Technologies)

KEY DRIVERS/CHALLENGES

  • High investor appetite drives M&A activity:
    • Venture capital (e.g., Fuel Ventures’ investment in Wombat)
    • MBOs (e.g., MBO of Wren Sterling)
    • Foreign investors (e.g., Xpansiv CBL’s acquisition of Project OTX)
    • Trade consolidators (e.g., AJ Bell’s acquisition of Adalpha)
  • Trade consolidators spend on:
    • Increasing M&A bandwidth to capitalise on bull market(e.g., Banca Akro’s acquisition of Oaklins Italy)
    • Expanding geographic footprints (e.g., Oanda’s acquisition of TMS Brokers)
    • Diversifying income streams (e.g., AIB’s acquisition of Goodbody)
  • ‘New world’ traders attract growth capital:
    • >7 online trading businesses raise funding in H1 2021(e.g., BUX, Freetrade, Invstr, Parkside Securities, FundGuard, Wombat and Robinhood)
    • >4 crypto trading businesses raise funding in H1 2021(e.g., Talos Trading, Bitpanda, Anchorage and Blockchain.com)

TRENDS TO WATCH

  • Abandoning the ‘old ways’—increasing embrace of trading tech
  • Increasing interest in ESG trading opportunities
  • Regulatory intervention in crypto-trading:
    • Bans on complex financial products which may pose retail consumer harm risk (e.g., UK FCA’s ban of sale of crypto-derivatives to retail consumers)
    • Clamp down on crypto exchanges (e.g., UK FCA’s approach to Binance’s UK operations)

OUR M&A FORECAST

Tech-enabled brokers attempt to claw market share from traditional brokers. Robinhood’s public debut on the Nasdaq cleaves a new path to the throne (or so financial sponsors believe).

 

Brokers/Corporate Finance—Publicly reported deals & situations

High investor appetite

Private equity:

  • BlackFin (Mortgage broking): Acquisition of Cafpi (May 2021)
  • Prosus Ventures and Tencent (Online trading): Participation in US$80 million Series C funding round for BUX (April 2021)
  • Left Lane Capital (Online trading): Participation in £50 million Series B funding round for Freetrade (March 2021)
  • Enlight Growth Partners (Online trading): Participation in US$24 million Series A funding round for Parkside Securities (February 2021)
  • Team8, Blumberg Capital and LionBird Ventures (Online investing): Participation in US$12 million Series A funding round for FundGuard (February 2021)
  • Fuel Ventures (Online trading): Participation in £2 million Seed funding round for Wombat (February 2021)
  • Ribbit Capital (Online trading): Participation in US$2.4 billion late-stage funding round for Robinhood (February 2021)

Foreign investors:

  • Xpansiv CBL (ESG commodity marketplace): Acquisition of Project OTX (March 2021)

Trade consolidators:

  • Flexpoint Ford (UK): Acquisition of AFH Financial Group (June 2021)
  • Banca Akros (Italy): Acquisition of Oaklins Italy (May 2021)
  • Institutional Shareholder Services (Sweden): Acquisition of Nordic Investor Services (April 2021)
  • AJ Bell (UK): Acquisition of Adalpha (March 2021)
  • Oanda (Poland): Acquisition of TMS Brokers (March 2021)
  • Credit Bank of Moscow (Russia): Acquisition of Region Investments (March 2021)
  • Banque Misr (US): Acquisition of 90% of CI Capital (March 2021)
  • AIB Group (Ireland): Acquisition of Goodbody Stockbrokers (March 2021)

Market appetite:

  • Robinhood (Online trading): Nasdaq IPO (March 2021)

 

Market consolidation to increase bandwidth and capacity

UK bankers are set for a bumper deal-making year after a frenetic start to 2021 sent the value of M&A to its highest level in 2 decades. Financial News (February 2021)

Acquisitions:

  • Investec (Financial advisory): Acquisition of minority stake in Capitalmind (May 2021)
  • MNC Kapital Indonesia (Brokerage): Acquisition of majority stake in Auerbach Grayson & Company (January 2021)

Partnerships:

  • Peel Hunt (Investment banking): Investment banking JV with Santander (April 2021)

 

Gravitation to online and crypto trading during lockdowns

Fundraisings—traditional asset classes:

  • BUX (Online trading): Successful US$80 million Series C funding round, led by Prosus Ventures and Tencent (April 2021)
  • Freetrade (Online trading): Successful £50 million Series B funding round, led by Left Lane Capital (March 2021)
  • Invstr (Online trading): Successful US$20 million Series A funding round, led by Ventura Capital (March 2021)
  • Parkside Securities (Online trading): Successful US$24 million Series A funding round, led by Enlight Growth Partners (February 2021)
  • FundGuard (Online trading): Successful US$12 million Series A funding round, led by Team8, Blumberg Capital and LionBird Ventures (February 2021)
  • Wombat (Online trading): Successful £2 million Seed funding round, led by Fuel Ventures (February 2021)
  • Robinhood (Online trading): Successful US$2.4 billion late-stage funding round, led by Ribbit Capital (February 2021)
  • HQLAx (Securities lending): Successful €14.4 million Series B funding round, led by BNY Mellon, Goldman Sachs, BNP Paribas and Citigroup (January 2021)

Fundraisings—digital asset classes:

  • Talos Trading (Crypto trading): Successful US$40 million Series A funding round, led by Andreessen Horowitz (May 2021)
  • Bitpanda (Crypto trading): Successful US$170 million Series B funding round, led by Valar Ventures and DST Global (March 2021)
  • Bitpanda (Crypto trading): Successful €10 million Series B extension round from Valar Ventures and DST Global (May 2021)
  • Anchorage (Crypto trading): Successful US$80 million Series C funding round, led by GIC (February 2021)
  • Blockchain.com (Crypto trading): Successful US$120 million Series C funding round, led by Google Ventures (February 2021)

 

Abandoning the ‘old ways’

  • Symphony (Trading tech): Acquisition of Cloud9 Technologies (June 2021)
  • ION (Trading tech): Acquisition of Dash Financial Technologies (February 2021)

 

Click here to download 'Financial services M&A reaches dizzying heights as COVID-19 lockdowns and travel bans come to an end' PDF

 

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Financial institutions M&A: Sector trends

 

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