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Financial services companies turn to acquisitions to access new technologies and products

Global Capital Confidence Barometer | Financial services

Financial services executives feel positive about dealmaking

The vast majority of financial services respondents (95%) surveyed in this 15th Capital Confidence Barometer see the financial services current M&A market to remain stable or improve over the next 12 months. More than half (55%) of companies have on average more than five deals in progress; 43% expect this number to increase. Nearly half (48%) expect to pursue acquisitions in the next 12 months.

Joint ventures and alliances a preferred inorganic route to growth

In today’s low-growth economy, financial services companies are balancing organic and inorganic strategies to grow their business, with joint ventures and alliances (22%) now a preferred strategy over acquisitions (20%). Establishing new dynamic partnerships with third parties (fintech and regtech) will be vital to success and a high priority for many firms.

Financial services companies become ever more sophisticated

Executives cite industry regulation and advances in technology/digitalization as most disruptive to their core business. Nearly half (47%) of respondents would look outside their sector and almost a quarter (24%) within their sector to acquire new technology or new products. The success rate of automation driving efficiencies is significantly higher in financial services compared to other sectors. Eight in 10 financial services companies also say they are using big data and analytics as part of the deal process.

Political instability a prime challenge to business strategies

Although 80% of financial services executives see the global economy as stable or improving, financial services companies admit to being challenged by market uncertainty political instability, such as Brexit. This may explain why Europe doesn’t appear to be a key investment priority for financial services executives in the next 12 months. Instead, the United States, Canada and Australia, and the emerging markets of China and Brazil appear to be more of a focus.

Financial services companies willing to walk away if the deal isn’t right

Financial services companies continue to act with caution despite their optimism in the market. Almost four-fifths (79%) indicate that they have failed to complete a planned acquisition in the last 12 months. Of those, one third (34%) cite due diligence issues as the deciding factor. For 35%, underestimating the challenges of IT integration is the number one reason for completed deals not living up to expectations.

Charlie Alexander

Global Banking and Capital Markets Leader, Transaction Advisory Services

+852 2629 3961

David Lambert

Global Insurance Leader, Transaction Advisory Services

+44 20 7951 9848

Nadine Mirchandani

Global Wealth and Asset Management Leader, Transaction Advisory Services

+1 212 773 0090

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