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Financial institutions M&A: Sector trends - September 2021

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September 2021

We highlight the key European M&A trends in the first half of 2021, and provide our insights into the outlook for M&A moving forward.

Introduction

As COVID-19 lockdowns and travel bans across Europe end, so too does the hiatus of European financial services M&A. With M&A surging to levels not seen since the fabled heyday of the 1990s, 2021 promises a bull market of extraordinary proportions.

In this edition, bring you the key deal highlights and 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 2021 and beyond. 

Key highlights from H1 2021 include the following:

  • Banks: As the COVID-19 hiatus of bank consolidation activity ends, European bank M&A 
    consolidation activity reaches unprecedented levels.
  • Fintech: E-commerce and online financial services experienced exponential growth during 
    the COVID-19 pandemic. The significance of digital offerings, and the RegTech
    tools to safeguard institutions and customers, has never been more apparent. 
    Europe's unicorns are at full gallop towards the digital future.
  • Asset/Wealth Management: Market consolidation continues at a feverish pace. The UK tops the 
    leader board, notching up 17 noteworthy deals in H1 2021
  • Payments: The COVID-19 pandemic drove e-commerce to levels never seen 
    before—payment rail, service and solution providers responded with 
    an unprecedented flurry of M&A activity
  • Stock Exchanges/Clearing Houses/Trading Venues: Global FMI juggernauts snatch up fund platforms, trading venues 
    and data analytics providers, under the increasingly vigilant gaze of 
    European competition authorities
  • Brokers/Corporate Finance: Financial advisers turn to M&A to deliver additional bandwidth, 
    capability and resources to ride the post-lockdown M&A tidal wave
  • Consumer Finance: Hyper-specialisation of the European consumer finance market 
    continues, with POS, entrepreneur, freelancer, migrant and payroll 
    finance businesses securing growth capital in H1 2021
  • Specialty Finance/Marketplace Lending: M&A levels dipped in H1 2021. Whilst institutional banks backed 
    trade and B2B finance platforms and VC supported P2P, SME and 
    treasury finance disruptors, both investor categories required 
    convincing to part with cash

M&A Forecast legend

European financial services M&A trends

Domestic banking champions across Europe merge, blinking into the sunlight

As the COVID-19 hiatus of bank consolidation activity ends, European bank M&A consolidation activity reaches unprecedented levels.

pillar

Europe’s unicorns come of age—COVID-19 lockdowns drive customer familiarity, utilisation and reliance on fintech

E-commerce and online financial services experienced exponential growth during the COVID-19 pandemic. The significance of digital offerings, and the RegTech tools to safeguard institutions and customers, has never been more apparent. Europe’s unicorns are at full gallop towards the digital future.

unicorn statue

Asset/Wealth Management

Market consolidation continues at a feverish pace. The UK tops the leader board, notching up 17 noteworthy deals in H1 2021

stock market

Payments

The COVID-19 pandemic drove e-commerce to levels never seen before—payment rail, service and solution providers responded with an unprecedented flurry of M&A activity

vault

Stock Exchanges/Trading Venues

Global FMI juggernauts snatch up fund platforms, trading venues and data analytics providers, under the increasingly vigilant gaze of European competition authorities

stock market

Brokers/Corporate Finance

Financial advisers turn to M&A to deliver additional bandwidth, capability and resources to ride the post-lockdown M&A tidal wave

stock market

Consumer Finance

Hyper-specialisation of the European consumer finance market continues, with POS, entrepreneur, freelancer, migrant and payroll finance businesses securing growth capital in H1 2021

unicorn statue

Specialty Finance/ Marketplace Lending

M&A levels dipped in H1 2021. Whilst institutional banks backed trade and B2B finance platforms and VC supported P2P, SME and treasury finance disruptors, both investor categories required convincing to part with cash

vault
stock market

Financial institutions M&A: Brokers/Corporate Finance

Financial institutions M&A sector trends: brokers/corporate finance — H1 2021 and outlook for H2 2021

Insight
|
4 min read

Financial advisers turn to M&A to deliver additional bandwidth, capability and resources to ride the post-lockdown M&A tidal wave.

Overview

CURRENT MARKET

  • Consistently active

WE ARE SEEING

  • Market consolidation to increase bandwidth and capacity:
    • Through acquisitions (e.g., Investec’s acquisition of minority stake in Capital mind)
    • Through partnerships (e.g., Peel Hunt’s investment banking JV with Santander)
  • Gravitation to online and crypto trading during COVID-19 lockdowns
  • Trading tech providers bulk up:
    • Financial market communications (e.g., Symphony’s acquisition of Cloud9 Technologies)
    • Order management customisation (e.g., ION’s acquisition of Dash Financial Technologies)

KEY DRIVERS/CHALLENGES

  • High investor appetite drives M&A activity:
    • Venture capital (e.g., Fuel Ventures’ investment in Wombat)
    • MBOs (e.g., MBO of Wren Sterling)
    • Foreign investors (e.g., Xpansiv CBL’s acquisition of Project OTX)
    • Trade consolidators (e.g., AJ Bell’s acquisition of Adalpha)
  • Trade consolidators spend on:
    • Increasing M&A bandwidth to capitalise on bull market(e.g., Banca Akro’s acquisition of Oaklins Italy)
    • Expanding geographic footprints (e.g., Oanda’s acquisition of TMS Brokers)
    • Diversifying income streams (e.g., AIB’s acquisition of Goodbody)
  • ‘New world’ traders attract growth capital:
    • >7 online trading businesses raise funding in H1 2021(e.g., BUX, Freetrade, Invstr, Parkside Securities, FundGuard, Wombat and Robinhood)
    • >4 crypto trading businesses raise funding in H1 2021(e.g., Talos Trading, Bitpanda, Anchorage and Blockchain.com)

TRENDS TO WATCH

  • Abandoning the ‘old ways’—increasing embrace of trading tech
  • Increasing interest in ESG trading opportunities
  • Regulatory intervention in crypto-trading:
    • Bans on complex financial products which may pose retail consumer harm risk (e.g., UK FCA’s ban of sale of crypto-derivatives to retail consumers)
    • Clamp down on crypto exchanges (e.g., UK FCA’s approach to Binance’s UK operations)

OUR M&A FORECAST

Tech-enabled brokers attempt to claw market share from traditional brokers. Robinhood’s public debut on the Nasdaq cleaves a new path to the throne (or so financial sponsors believe).

Brokers/Corporate Finance—Publicly reported deals & situations

High investor appetite

Private equity:

  • BlackFin (Mortgage broking): Acquisition of Cafpi (May 2021)
  • Prosus Ventures and Tencent (Online trading): Participation in US$80 million Series C funding round for BUX (April 2021)
  • Left Lane Capital (Online trading): Participation in £50 million Series B funding round for Freetrade (March 2021)
  • Enlight Growth Partners (Online trading): Participation in US$24 million Series A funding round for Parkside Securities (February 2021)
  • Team8, Blumberg Capital and LionBird Ventures (Online investing): Participation in US$12 million Series A funding round for FundGuard (February 2021)
  • Fuel Ventures (Online trading): Participation in £2 million Seed funding round for Wombat (February 2021)
  • Ribbit Capital (Online trading): Participation in US$2.4 billion late-stage funding round for Robinhood (February 2021)

Foreign investors:

  • Xpansiv CBL (ESG commodity marketplace): Acquisition of Project OTX (March 2021)

Trade consolidators:

  • Flexpoint Ford (UK): Acquisition of AFH Financial Group (June 2021)
  • Banca Akros (Italy): Acquisition of Oaklins Italy (May 2021)
  • Institutional Shareholder Services (Sweden): Acquisition of Nordic Investor Services (April 2021)
  • AJ Bell (UK): Acquisition of Adalpha (March 2021)
  • Oanda (Poland): Acquisition of TMS Brokers (March 2021)
  • Credit Bank of Moscow (Russia): Acquisition of Region Investments (March 2021)
  • Banque Misr (US): Acquisition of 90% of CI Capital (March 2021)
  • AIB Group (Ireland): Acquisition of Goodbody Stockbrokers (March 2021)

Market appetite:

  • Robinhood (Online trading): Nasdaq IPO (March 2021)

Market consolidation to increase bandwidth and capacity

UK bankers are set for a bumper deal-making year after a frenetic start to 2021 sent the value of M&A to its highest level in 2 decades. Financial News (February 2021)

Acquisitions:

  • Investec (Financial advisory): Acquisition of minority stake in Capitalmind (May 2021)
  • MNC Kapital Indonesia (Brokerage): Acquisition of majority stake in Auerbach Grayson & Company (January 2021)

Partnerships:

  • Peel Hunt (Investment banking): Investment banking JV with Santander (April 2021)

Gravitation to online and crypto trading during lockdowns

Fundraisings—traditional asset classes:

  • BUX (Online trading): Successful US$80 million Series C funding round, led by Prosus Ventures and Tencent (April 2021)
  • Freetrade (Online trading): Successful £50 million Series B funding round, led by Left Lane Capital (March 2021)
  • Invstr (Online trading): Successful US$20 million Series A funding round, led by Ventura Capital (March 2021)
  • Parkside Securities (Online trading): Successful US$24 million Series A funding round, led by Enlight Growth Partners (February 2021)
  • FundGuard (Online trading): Successful US$12 million Series A funding round, led by Team8, Blumberg Capital and LionBird Ventures (February 2021)
  • Wombat (Online trading): Successful £2 million Seed funding round, led by Fuel Ventures (February 2021)
  • Robinhood (Online trading): Successful US$2.4 billion late-stage funding round, led by Ribbit Capital (February 2021)
  • HQLAx (Securities lending): Successful €14.4 million Series B funding round, led by BNY Mellon, Goldman Sachs, BNP Paribas and Citigroup (January 2021)

Fundraisings—digital asset classes:

  • Talos Trading (Crypto trading): Successful US$40 million Series A funding round, led by Andreessen Horowitz (May 2021)
  • Bitpanda (Crypto trading): Successful US$170 million Series B funding round, led by Valar Ventures and DST Global (March 2021)
  • Bitpanda (Crypto trading): Successful €10 million Series B extension round from Valar Ventures and DST Global (May 2021)
  • Anchorage (Crypto trading): Successful US$80 million Series C funding round, led by GIC (February 2021)
  • Blockchain.com (Crypto trading): Successful US$120 million Series C funding round, led by Google Ventures (February 2021)

Abandoning the ‘old ways’

  • Symphony (Trading tech): Acquisition of Cloud9 Technologies (June 2021)
  • ION (Trading tech): Acquisition of Dash Financial Technologies (February 2021)

 

Click here to download 'Financial services M&A reaches dizzying heights as COVID-19 lockdowns and travel bans come to an end' PDF

 

 

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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.

© 2021 White & Case LLP

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