Europe's post-GFC leaner and better-capitalised banks are put to the test by the COVID-19 pandemic
Banks with stronger balance sheets capitalise on M&A opportunities amidst COVID-19 market turmoil, while their weaker peers consolidate to survive.
Introduction
The COVID-19 pandemic has ravaged the European financial services sector, sending shockwaves across the FIG M&A landscape. It is no surprise that M&A volumes have plummeted. Yo-yoing valuations, buyer conservatism and the promise of "cheaper" stressed / distressed opportunities have compounded a cavernous rift between seller and buyer expectations. Reality is slowly sinking in—as the possibility of a v-shaped economic recovery becomes increasingly bleak, concern is growing around whether IFRS 9 loss estimation is much more than educated guesswork.
But all is not lost. The resilience of established financial institutions, fortified in the decade since the global financial crisis, agility afforded by digitalisation and evolution of customer interaction with financial services have contributed to M&A hotspots which burn bright amidst market gloom.
In this edition, we hone in on those hotspots and highlight the key M&A trends across Europe and the UK. Focusing on Banks, Fintech and Other Financial Services, we also provide our insights on the outlook for M&A in H2 2020 and beyond.
Key highlights from H2 2019 include the following:
- Banks: Surge in strategic M&A, post-easing of lockdowns, as pent-up deal-making prowess is unleashed.
- Fintech: Financial sponsors demand more bang for buck, as equity valuation volatility wreaks havoc for funding rounds.
- Asset/Wealth Management: Differing bank prerogatives drives deal-making— some European banks tag-out from non-core business lines, while others tag-in for stable returns.
- Payments: Lockdown utilisation levels encourage cross-border operators to scale-up and private equity investors to pile-in.
- Stock Exchanges/Clearing Houses/Trading Venues: Clash of the pan-European titans—M&A plans signalled by LSE, Euronext and Deutsche Börse.
- Brokers/Corporate Finance: Thinning of the herd continues as "traditional" brokers struggle to remain profitable amidst encroachment by Bulge Bracket and disruption by fintech.
- Consumer Finance: A time of temperance as COVID-19 covenant breach forbearance, payment holiday and repossession deferral relief measures take their toll.
- Specialty Finance/Marketplace Lending: Panacea or plague—what will the true impact of accreditation for government-backed loan schemes be?
European financial services M&A trends
As the technicolour gloss of unicorns fade, investors attempt to back the right horses
by Hyder Jumabhoy and Guy Potel
H1 2020 heralds an entirely new era for fintech, a market segment which scarcely existed at the time of the global financial crisis. Many founders and investors, who have enjoyed a bull run since 2015, have had their first taste of the bear markets which banks endured in the years following 2008.
Asset/Wealth Management
Differing bank prerogatives drive deal-making—-some European banks tag-out from non-core business lines, while others tag-in for stable returns.
Payments
by Jan Jensen and Leonardo Graffi
Lockdown utilisation levels encourage cross-border operators to scale-up and private equity investors to pile-in.
Stock Exchanges/Clearing Houses/ Trading Venues
by Dr. Jost Kotthoff and Darragh Byrne
Clash of the pan-European titans—-M&A plans signalled by LSE, Euronext and Deutsche Börse.
Brokers/Corporate Finance
by Franck De Vita and Hugues Mathez
Thinning of the herd continues as "traditional" brokers struggle to remain profitable amidst encroachment by Bulge Bracket and disruption by fintech.
Consumer Finance
by Daniel Turgel and Henrik Wireklint
A time of temperance as COVID-19 covenant breach forbearance, payment holiday and repossession deferral relief measures take their toll.
Specialty Finance/Marketplace Lending
by Ashley Ballard and Jonathan Rogers
Panacea or plague—-what will the true impact of accreditation for government-backed COVID-19 loan schemes be?
