close
Share with your friends

The US domestic market is likely to see continued near-term M&A activity. Canadian banks could be expected to focus on loan management and capital preservation although targeted complementary acquisitions (including further tech-proofing their operations) remain a possibility. In Latin America, the impact of COVID-19 is still unclear, and capital market reduction will likely delay anticipated transactions. 

US

COVID-19 market disruption will likely create distress among many financial services players — particularly those with exposure to the energy, travel and hospitality, and commercial real estate sectors. These conditions might create opportunities for well-capitalized institutions looking to increase scale or move into new markets. The November 2020 election might create additional market uncertainty and a decrease in M&A in banking as players wait to see in which direction the regulatory wind will be blowing. On balance, payment processors, data providers, and wealth management firms that have been catalysts for inter-industry consolidation and have sparked increased interest from PE firms, which could continue to see at or above market deal activity for the rest of the year after the COVID-19 market shutdown ends.

COVID-19 has significantly slowed down current banking deal activity. When the market is able to emerge from the lockdown, we expect there will be distressed deal opportunities for highly capitalized players. Other sectors (fintech and wealth management) will likely stay strong until September or October at which point, they may slow down as well.

Timothy Johnson
Partner, Deal Advisory Financial Services
KPMG in the US

Canada

Organic growth would be hard to come by during 2020. Banks are focused on supporting clients in a, so far, concerted manner, and on loan management and capital preservation. COVID-19 has, in certain instances, caused a review and tech-proofing of their operations (which is expected to continue). These dynamics could lead to investments in tech (whether internally or through external fintech investments) that would position banks to face the future, compounding the pressures to be exercised as open banking is being focused by the government. Furthermore, banks could be expected to continue their review of existing operations, leading to sustained pruning of divisions/assets, if deemed non-core or sub-optimal in terms of scale, profitability or growth prospects. That said, selective buy-side M&A is anticipated, albeit with challenges, especially for assets that complement existing lines of businesses. Canadian banks are likely to first consider relevant acquisition targets that reinforce their domestic presence, primarily focusing on domestic (and, as relevant, international) wealth and asset management, building up existing operations in non-Canadian core markets (U.S. and certain Latin American countries).

Latin America

The main economy in the region, Brazil, experienced record M&A activity in 2019. Banks continue to pursue acquisitions of fintechs and digital offerings, while PE and VC investors remain active in the region. International banks are looking to invest in asset management, investment banking and other high-net-worth-focused products. In Argentina, following the 2018–19 crisis, a significant slowdown of economic activity is expected in 2020; nonetheless, some activity in fintech investment and digital banking is anticipated. Chile’s social unrest has impacted activity, which, unlike last year, is set to be lower. The overall regional impact of COVID-19 is still unclear, with some analysts predicting a slowdown in some countries. Banks and PE are still well-capitalized and looking for M&A opportunities, yet the timing of these transactions remains unclear. Capital market reduction could impact the timing of some of the anticipated transactions, delaying activities until 2021.