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Deal maker or breaker: FS global M&A trends, 2019

  • United Kingdom
  • Global

    28-01-2019

     

    Eversheds Sutherland: FinTech and PE to take greater roles in global FS M&A, 2019 while volume of high value deals expected to fall, according to report

    Eversheds Sutherland has published a report exploring the global M&A trends in the financial services (FS) industry over the last three years.

    The report: ‘Data in detail: Financial Services M&A global trends’ is based on data from Mergermarket – a media company that provides specialist news, research, analysis and data on financial markets – with analysis from Eversheds Sutherland financial services Partner, Hugo Laing.

    It examines the market trends that have dominated the global FS M&A industry over the last three years, and those that deal makers can expect to see in 2019.

    Report headlines…

    • Global M&A in the financial services remained relatively flat in 2018, but has held up well over the past three years.

    • Whilst there was a significant number of big deals in 2018, fewer very large deals are expected in 2019, particularly in the insurance sector where much of the consolidation at the larger end of the market has completed (insurance deals taking up five of the ten largest deals of 2018 in the FS market)

    • Private equity continues to play a larger role in FS M&A. This trend is expected to continue throughout 2019.

    • FinTech – the development in the RegTech, InsureTech and LegalTech spaces, combined with the growth of the payment services all suggest that this is an area of the FS market which will remain strong through into 2019.

    Hugo Laing commented:

    “Coming into 2019, we expect to see fewer larger deals in the financial services market, particularly in the insurance sector where significant consolidation in the P&C/non-life market has already happened. However, we could see further consolidation in the life insurance sector in Europe and expect this market to be quite busy.

    “Private equity will continue to play a large role in financial institutions M&A across the globe (particularly in Europe and the US, as we have seen in the past year). As global financial institutions solidify their strategies, we also expect to see a greater number of Fintech and InsurTech deals and for these deals to really increase in value.”

    Drilling down…

    Although global FS M&A markets saw pockets of high levels of deal activity in 2018, data from the Eversheds Sutherland report showed a slight dip in comparison to the levels seen in 2017.

    2018 was again hallmarked by a small number of mega-deals including the private fundraising by Ant Financial, bringing the potential size of the FinTech market firmly into focus.

    European deal volumes in 2018 were up compared with the previous year, although with a lower aggregate value.

    Laing added:

    “Although political uncertainty will undoubtedly impact the number and type of deals being executed in 2019, the acquisition of XL Group Ltd by AXA and the JLT group by Marsh & McLennan of the US – the first and third largest FS deals of 2018 globally by value – along with a host of other cross-border acquisitions show that the European market remains important for M&A, with areas of activity that are set to increase significantly.”

    According to the report, the US FS industry enjoyed a busy 2018, albeit down from the year before. M&A activity in the FS sector involved traditional participants and non-sector players, such as private equity firms, pension funds, large tech companies and foreign conglomerates.

    Asia has seen a general uptick in FS deal activity against the previous year (in terms of value), with private equity buyouts being particularly active. The relaxation of regulations pertaining to foreign investment in the Chinese banking sector by the China Banking and Insurance Regulatory Commission (CBIRC) have helped to open up the FS sector.

    Regional reforms across the Middle East have recently been focusing on transforming the M&A environment to attract foreign investment. M&A activity in the Middle East seems to be outward looking in nature, with business leaders looking to strategic joint ventures with foreign investors. The push to move away from oil and infrastructure investment has led to a diversification of investment opportunities, which has the potential to be especially beneficial to the FinTech sector.

    Looking ahead…

    The FS industry will continue to focus on the potential implications of a ‘no-deal’ Brexit in the early part of 2019, and possibly beyond.

    According to Laing, the need to adapt businesses to the post-Brexit landscape will occupy at least some of the energy of the European FS industry which will likely distract from M&A activity.

    The main drive of deals in non-core business units seems to have passed for the time being, with an anticipation that the coming year, much like the last, will be dominated by a smaller number of large strategic acquisitions.

     

    Disclaimer

    This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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