Global FS M&A activity plummeted by 16% in deal volume and 14% in value compared to 2019. Thanks to a frenzy of transactions which kept the deals well above the global financial crises period. Although M&A appeared a more complex undertaking for financial services during the COVID-19 pandemic, for many players the timing was ripe to seek benefits from strategic deal making.

Among sub-sectors, banking continued to dominate with 43% of total FS deals followed by asset management (31%) and insurance (27%). At a regional level, North America (particularly the US) continued to be the strongest transaction market. Mega transactions continued to do the rounds during the year, particularly, in the banking sector while cross-border transactions-maintained momentum.

Overall trends seen in the sector — with a dip in valuations for most of the financial firms, well capitalized players were in good shape and continued to look for scale and diversity amid an uncertain economic outlook. Appetite for new business models and technologies have proved their mettle this year. Consolidation deals accelerated in many geographies, particularly in Europe. Divesture of non-core businesses remained central to M&A strategy of players. Moreover, in various geographies, relaxed capital requirements or deal restrictions fostered deals.

Global FS deals
(volume announced)

3,266

Global value of FS deals announced
(USD bn)

377

Non-domestic/ Cross boarder FS deals
(percent of total FS deals)

23%

Global PE deals in FS
(percent of total FS deals)


19%


Source

(1) Deals announced include pending and completed deals.
(2) Deal value represents total value of announced transactions where value is disclosed publicly.
(3) Non-domestic banking deals include regional and inter-continental (excludes domestic) deals.
(4) PE deals have been extracted from Mergermarket database. The database considers deals above US$5 million in deal value.
(5) Figures could vary from previous edition, as the database keeps updating stats.
(6) Payment transactions are included in banking sector deals.
Source: ThomsonOne, Mergermarket

Generating value during volatility in the Global FS M&A landscape for 2020

In the Global FS M&A landscape for 2020

Global Banking

Among all sub-sectors, banking deal activity dampened the most during 2020. The economic fallout has widened the rift between well capitalized and weak banks creating opportunities for acquisitions and divestures of sub-scale businesses. The rising costs and regulatory support have spurred domestic consolidation to give rise to local champions, especially in Europe. While regional and super regional bank consolidation accelerated in the US. Even after gradual consolidation, banking remains a fragmented industry with a scope for more consolidation deals.


Global Insurance

Deal activity remained resilient with a lift in value, mainly due to few mega M&A activity, including between Aon Plc and Willis Towers Watson PLC worth US$30bn. Significant levels of deployable capital and low interest rate environment are pushing many insurers carrying capital intensive blocks of businesses to re-valuate their portfolio of business. COVID-19 has further accelerated the opportunities to transform business models, access emerging innovative technologies and modernize operating models.


Global Asset Management

Deals stay hot in 2020 with two large transactions (>US$5bn). Market experts view Morgan Stanley’s recent acquisition of Eaton Vance as a bellwether of accelerated consolidation in the industry. Low-fee, passive index funds are creating downward pressure on fees while limited organic growth opportunities is driving further consolidation especially among small and medium size asset managers. Deal activity continues to remain strong from a bolt-on capabilities perspective.


Potential Opportunities

A slight uptick in the number of available FS assets on markets when compared to June 2020. Countries that remain the hotspots for investors in 2021 are the US, Italy, Australia, UK and China/Hong Kong. There is no dearth of opportunities in the year ahead.


  

Get in touch

Giuseppe Latorre

Partner, KPMG Advisory, Corporate Finance
KPMG in Italy