According to the latest EY M&A analysis, the UK financial services industry closed the first half of 2021 having announced 121 deals, which is more than double the 57 deals announced during the same period in 2020. While the total deal value in H1 2021 fell year on year; from £32.0bn between January and June 2020 to £13.0bn this year, this is due to a single big insurance transaction in 2020.
Taking a deeper look at sector specific M&A activity
- The number of insurance deals rose from 18 in H1 2020 to 33 in 2021, but the total deal value fell from £29.1bn to £3.9bn (most of the value last year coming from the one large insurance deal).
- In the wealth and asset management industry, the number of deals climbed from 17 in H1 2020 to 62 in H1 2021, with the total deal value also seeing a strong increase from £0.5bn to £6.1bn.
- There were 26 banking sector deals in H1 2021, up slightly from the 22 in the same period in 2020 with deal value also rising marginally from £2.4bn to £3.0bn year on year
M&A activity is expected to continue to improve in the second half of 2021 as the economic recovery accelerates.
Tom Groom, UK Financial Services Strategy and Transactions Leader at EY, comments:
“UK financial services M&A activity is on the rise again, following a subdued 2020 in the wake of the COVID-19 pandemic. There were 64 more deals announced during the first of 2021 compared to the same period in 2020, which is perhaps testament to the positive sentiment around the large-scale vaccine roll-out and the knock-on impact on economic recovery. While overall deal value was down, most of last year’s value came from one large insurance transaction, without which 2020 would have been particularly quiet on the M&A front.”
The number of non-UK firms acquiring UK targets was up from 13 in H1 2020 to 32 in 2021, and the total value rose from £1.2bn in H1 2020 to £6.8bn in the same period in 2021. As for UK firms acquiring overseas targets, this rose from 22 in H1 2020 to 29 in H1 2021, with deal value increasing from £2.1bn to £2.4bn.
Tom Groom concludes: “The COVID-19 pandemic has challenged business and operating models and financial resilience. While we are not fully out of the woods yet, in the UK we are looking to economic recovery underpinned by vaccine progress. Financial services firms have been addressing the numerous challenges they have faced over the past 18 months, and in some cases M&A has been - and will continue to be - the answer. As a result, the number of M&A deals in financial services has been rising this year, and we expect this trend to continue throughout the rest of 2021. It is important to note that downside risks to the recovery remain, particularly as government support tapers away and stimulus programmes reach the point of repayment, but these challenges will likely drive further M&A activity in the market.”