- The UK financial services industry completed 211 deals during 2019, down from 236 in 2018, although value increased significantly from £24.9bn to £39.8bn
- In banking, while the number of deals dropped from 68 in 2018 to 49 in 2019, the value increased from £9.1bn in 2018 to £30.7bn in 2019
- In insurance, the number of deals rose slightly from 70 in 2018 to 72 in 2019 but the deal value dropped from £11.8bn to £7.3bn
- In wealth and asset management, volume and value were both down on the previous year: 98 deals were completed in 2018 with a value of £4bn, compared to 90 deals in 2019, with a value of £1.8bn
- Most of the value in 2019 came from a small number of large deals
- Further consolidation and M&A activity is expected throughout 2020 as firms seek to increase profitability
Tom Groom, UK Financial Services Transactions Advisory Leader at EY, comments: “Although there were 25 fewer deals in 2019 compared to the previous year, the total deal value across the past year rose significantly from just under £25bn in 2018 to almost £40bn in 2019. Most of the value came from a small number of very big deals, which was impressive in such a turbulent and uncertain year, but now, with the General Election landing a decisive majority government, such values should come as less of a surprise. However, given the Election only happened last month, it is too early to say if the Brexit headwinds that have plagued activity levels for some time, are finally beginning to lift. One would hope that over the coming weeks and months financial services firms will have more clarity when it comes to Brexit, giving them the confidence to progress their growth and acquisition plans throughout 2020.
“All sectors were active in M&A during 2019, albeit to varying degrees. Banking saw increased interest in larger firms buying challenger banks, with continued high levels of activity around the payments segment. While there were 19 fewer deals in 2019 than the previous year, the value actually increased from £9.1bn in 2018 to £30.7bn in 2019 – almost entirely driven by the London Stock Exchange’s takeover of Refinitiv, the US-based provider of financial data. In insurance M&A, there were just two more deals completed in 2019 than the year before, with a focus on the UK insurance broking sector, which is a trend driven by the demand for specialist franchises. Counter to the overall picture though, deal value dropped £4.5bn year on year. Wealth and asset management deal activity comprised a number of deals across different segments – though both volume and value were down on the previous year. Eight fewer deals were completed in 2019, accompanied by a fall in value of £2.2bn.
“Brexit has clearly impacted the appetite for M&A, and over the past year the number of non-UK firms acquiring UK targets fell from 57 in 2018 to 44 in 2019, with the total value down from £11.6bn to £5.5bn. UK firms acquiring overseas targets was also down from 54 in 2018 to 46 in 2019, however, deal value here actually increased from £1.9bn to £23.5bn – again mainly due to the London Stock Exchange deal.
“Looking ahead, we’d expect consolidation to be a continuing theme for all financial services firms in 2020 as they strive for ever-improved profitability. Brexit – although more certain now – will continue to impact the economic environment and we’ll keep a watching brief on how it impacts firms’ growth plans over the next year, as well as the ongoing challenges FS firms are navigating their way through, including major structural shifts such as Open Banking, the high costs of regulation and transforming legacy businesses and the investment opportunities of technology.”