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Financial institutions M&A: Sector trends - July 2022

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July 2022

We highlight the key UK & European M&A trends in H2 2021 and H1 2022, and provide our insights into the outlook for M&A moving forward.

Introduction

Key highlights from H2 2021 include the following:

Banks: High levels of M&A across the UK and Europe, notwithstanding uncertainty ignited by the Russia/Ukraine conflict. Europe's banks have emerged from COVID-19 turmoil resolute in their ambitions to shed non-core assets, consolidate regional strongholds and rigorously pursue digitalisation strategies.
Fintech: Europe has bucked the global trend of tightening private capital purse strings. While successful funding rounds rage on, fintechs with critical mass are deploying M&A strategies to consolidate horizontally and integrate vertically.
Asset/Wealth Management: With over 350 deals in the European AWM sector in 2021, M&A consolidation activity is hotter than it has ever been in the past 15 years. Conventional wisdom is now under the microscope—is bigger really better?
Payments: Investor appetite is at an all-time high—while VC investors back growing service providers, PE investors supercharge IPO glide paths and established banks refuse to abdicate market share.
Stock Exchanges/Trading Venues: Europe’s FMI goes digital—data analytics, capital markets solutions, RegTech and DLT-based tech acquisitions feed the steady stream of M&A activity.
Brokers/Corporate Finance: Marginal improvement in investor sentiment for high-quality brokers, particularly across online brokerage, crypto trading and carbon credit trading.
Consumer Finance: BNPL steals the show—20 successful European BNPL provider funding rounds in the past 12 months, covering the full spectrum from Seed through to late-stage.
Specialty Finance/Marketplace Lending: Marginal uptick in M&A levels in the past 12 months, with property, automotive and revenue-based finance attracting the most investor interest.

European financial services M&A trends

Europe’s banks emerge from the COVID-19 pandemic resolute in their ambitions

High levels of M&A across the UK and Europe, notwithstanding uncertainty ignited by the Russia/Ukraine conflict. Europe's banks have emerged from COVID-19 turmoil resolute in their ambitions to shed non-core assets, consolidate regional strongholds and rigorously pursue digitalisation strategies

Read 27 min. article

The long-awaited arrival of Europe’s new breed of decacorns

Europe has bucked the global trend of tightening private capital purse strings. While successful funding rounds rage on, fintechs with critical mass are deploying M&A strategies to consolidate horizontally and integrate vertically

Read 47 min. article

Asset/Wealth Management

With over 350 deals in the European AWM sector in 2021, M&A consolidation activity is hotter than it has ever been in the past 15 years. Conventional wisdom is now under the microscope—is bigger really better?

Read 9 min. article

Payments

Investor appetite is at an all-time high—while VC investors back growing service providers, PE investors supercharge IPO glide paths and established banks refuse to abdicate market share

Read 14 min. article

Stock Exchanges/Trading Venues

Europe's FMI goes digital—data analytics, capital markets solutions, RegTech and DLT-based tech acquisitions feed the steady stream of M&A activity

Read 3 min. article

Brokers/Corporate Finance

Marginal improvement in investor sentiment for high-quality brokers, particularly across online brokerage, crypto trading and carbon credit trading

Read 4 min. article

Consumer Finance

BNPL steals the show—20 successful European BNPL provider funding rounds in the past 12 months, covering the full spectrum from Seed through to late-stage

Read 11 min. article

Specialty Finance/Marketplace Lending

Marginal uptick in M&A levels in the past 12 months, with property, automotive and revenue-based finance attracting the most investor interest

Read 5 min. article

Sector trends - July 2022: Specialty Finance/Marketplace Lending

UK & European Financial Services M&A: Sector trends H2 2021 | H1 2022 — Specialty Finance/Marketplace Lending

Insight

25 July 2022

5 min read

Jonathan Rogers |

Patrik Erblad

Marginal uptick in M&A levels in the past 12 months, with property, automotive and revenue-based finance attracting the most investor interest.

Overview

Current Market

Marginal uptick

We Are Seeing

Top 3 verticals attracting VC/PE cash in the last 12 months:
- Property finance (e.g., Selina Advance and Fronted)
- Automotive finance (e.g., Moove)
- Revenue-based finance (e.g., re:cap and Karmen)
Established banks favour "tried & tested" verticals:
- Automotive finance (e.g., Société Générale, Crédit Agricole and Intesa Sanpaolo)
- Invoice financing (e.g., Lloyds' acquisition of 20% of Satago)
- Factoring (e.g. Credit Fondiario's acquisition of Fifty)
Successful IPOs on London's stock exchanges (e.g., Forward Partners, Eurowag and LendInvest)

Key Drivers/Challenges

Diverse universe of investors:
- Private equity—backing first-movers in underserviced verticals (e.g., Centerbridge's equity investment in Stenn)
- Venture capital—backing Europe's disruptors (e.g., Speedinvest's participation in Moove's Series A and A2 funding rounds)
- SWFs—supporting international expansion of early-stage lenders
- Trade consolidators—consolidating share-of-wallet (e.g., Société Générale's acquisition of 53% of LeasePlan, Crédit Agricole's acquisition of 50% of Leasys Rent and Intesa Sanpaolo's acquisition of UBI Leasing)
Stockpiling of growth capital across:
- New market entrants (e.g., Karmen, Fronted, Previse, etc.)
- Established specialty lenders (e.g., Lendable, Selina Advance, Moove, etc.)
Established banks partner to fill gaps in lending repertoire (e.g., Standard Chartered's supply chain finance partnership with Linklogis, Barclays's mortgage partnership with LendInvest and HSBC's mortgage partnership with LendInvest)

Trends to Watch

Consolidation amongst "challenger" lenders as the market becomes increasingly crowded
Evolution of partnership models as banks leverage digital platform distribution channels to tap into new geographies and customer demographics
Inorganic growth of first-mover specialty finance providers to conquer their niches, particularly across SME and unsecured lending, with prop finance and automotive finance to follow

Our M&A Forecast

M&A levels are likely to remain relatively constant in the medium term, with a tipping point as and when the default rate impact of interest rate hikes in the post COVID 19 climate becomes clearer.

Growing buyer/investor/partner interest

Deal highlight:

White & Case advised Nordic Capital on the 3-way merger of property/construction finance providers Baufi24 Baufinanzierung, Hüttig & Rompf and Creditweb to form Bilthouse Group.

Specialty finance PE and VC transaction activity is making a resurgence in 2021 after a standstill caused by COVID-19 (S&P Global, August 2021)

PE/VC investors:

Credo Capital (Revenue-based finance): Participation in £300 million Series A funding round for Bloom (May 2022)
Force Over Mass, PostFinance, 1818 Venture Capital and Tribe Capital (Revenue-based finance): Participation in £115 million Series A funding round for Outfund (April 2022)
Centerbridge (Trade finance): Participation in US$50 million equity funding round for Stenn (April 2022)
GCC-based SWF (Revenue-based finance): Participation in US$15 million extended-Seed funding round for re:cap (April 2022)
Tencent (SME lending): Participation in US$10.4 million Series B funding round for Previse (April 2022)
Speedinvest, Left Lane Capital and thelatest.ventures (Automotive finance): Participation in US$105 million Series A2 funding round for Moove (March 2022)
Fasanara Capital (Prop lending): Participation in £20 million debt and equity funding round for Fronted (November 2021)
Speedinvest and Left Lane Capital (Automotive finance): Participation in US$23 million Series A funding round for Moove (August 2021)

Trade consolidators:

Baufi24 Baufinanzierung, Hüttig & Rompf & Creditweb to form Bilthouse Group (Prop lending): Merger (March 2022)
Manx Financial Group (Automotive finance): Acquisition of 50.1% of Payment Assist (May 2022)
Lloyds (Invoice financing): Acquisition of 20% of Satago (March 2022)
Intesa Sanpaolo (Commercial and automotive finance): Acquisition of UBI Leasing (January 2022)
Société Générale (Automotive finance): Acquisition of 53% of LeasePlan (January 2022)
Credit Fondiario (Factoring): Acquisition of Fifty (January 2022)
Crédit Agricole (Automotive finance): Acquisition of 50% of FCA Bank and Leasys Rent (December 2021)

IPOs:

Generalfinance (SME finance): Listing on Euronext STAR Milan (June 2022)
Forward Partners (Revenue-based financing): £36.5 million AIM IPO (July 2021)
Eurowag (Automotive finance): £200 million LSE IPO (October 2021)
LendInvest (Prop lending): £255.6 million LSE IPO (July 2021)

Specialty finance businesses scaling up

Bloom (Revenue-based finance): Successful £300 million Series A funding round led by Credo Capital (May 2022)
Factris (Working capital finance): Successful €10 million Series B funding round led by NN Investment Partners (May 2022)
Outfund (Revenue-based finance): Successful £115 million Series A funding round led by Force Over Mass, PostFinance, 1818 Venture Capital and Tribe Capital (April 2022)
Stenn (Trade finance): Successful US$50 million equity funding round led by Centerbridge (April 2022)
re:cap (Revenue-based finance): Successful US$15 million extended-Seed funding round led by a GCC-based SWF (April 2022)
Previse (SME lending): Successful US$10.4 million Series B funding round led by Tencent (April 2022)
Tradeplus24 (SME lending): Successful US$30 million debt funding round led by a Partners for Growth (July 2021)
Moove (Automotive finance): Successful US$105 million Series A2 funding round led by Speedinvest, Left Lane Capital and thelatest.ventures (March 2022)
Lendable (Marketplace lending): Successful £210 million funding round led by Ontario Teachers' Pension Plan (March 2022)
Selina Advance (Prop lending): Successful US$150 million Series B funding round led by Lightrock (February 2022)
Karmen (Revenue-based finance): Successful €22 million equity and debt funding round led by Fasanara Capital and Samaipat (January 2022)
Fronted (Prop lending): Successful £20 million debt and equity funding round led by Fasanara Capital (November 2021)
Goodlord (Household bill-splitting): Acquisition of acasa (October 2021)
Moove (Automotive finance): Successful US$23 million Series A funding round led by Speedinvest and Left Lane Capital (August 2021)
Tradeplus24 (SME lending): Successful US$25 million pre-Series B funding round led by a European family office (July 2021)

Partnering to gain scale

Standard Chartered (Supply chain finance): Supply chain finance JV with Linklogis (August 2021)
LendInvest (Mortgage lending): Property finance JVs with Barclays and HSBC (August 2021)

ESG

NatWest: Electric vehicle financing JV with EV8 Switch (September 2021)

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