2018 H1 UK financial services M&A overview – a robust first half

04 July 2018

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  • UK financial services industry completed 83 deals totalling £12bn in the first half of this year
  • UK insurance deal values off to a strong start, driven by large transactions in the life insurance sector

Gavin Jordan, UK Financial Services Transactions Leader at EY, comments on deal volume and values at the halfway point of 2018:
“2017 was not a record-breaking year for UK financial services M&A in terms of volume of deals, but it’s not all about quantity. Over the course of last year, the sector completed 122 deals, totalling £25bn, which was robust relative to the past few years, where aside from 2015, we have seen deal values fairly depressed, despite higher volumes. This trend looks to have continued through the first half of 2018, with 83 deals totalling £12bn executed this year to date. This is an encouraging statistic given the backdrop of continued Brexit uncertainty and ongoing regulatory change. Over recent months alone, deals and discussions, particularly among UK challenger and digital banks, have evidenced a push for further consolidation across the segment.

“Over the past few years, the impact of increased regulatory compliance, poor economic growth and the low interest rate environment, and increasing competition in the market has created a tough backdrop for M&A across financial services, but it looks like it’s now firmly back on the books for many businesses combatting rising costs. We expect consolidation and convergence will continue to be dominant themes for banks, insurers and asset managers this year as they respond to profound structural shifts in the current environment, including open banking, data-sharing and the proliferation of third-party platforms. As we plough into the second half of 2018, one of the biggest challenges the industry will face is responding to disruptive technology threats through acquisitions, partnerships and alliances, as firms strive for increased profitability and vie for market share growth.”

Commenting specifically on the UK insurance sector, David Lambert, Global Insurance Transactions Leader at EY, says:
“M&A in the UK insurance market has got off to a strong start in 2018, with 24 deals transacted through the first half of the year. Tracking at over £4.5bn at the halfway point, the value of deals has already surpassed the full year values seen in 2016 and 2017, driven by a number of large transactions in the life insurance sector. Wider sector transformation is set to drive further consolidation, increase the sales of non-core businesses, and also lead to growth-related M&A aimed at building out critical new capabilities and customer propositions. We expect continuing high levels of M&A activity across all elements of the UK insurance sector in the second half of 2018.”

ENDS

Notes to Editors

  • This M&A data is based on our analysis of ThomsonONE.com, Mergermarket and SNL deal data from 1 January 2010 to 30 June 2018
  • For the purposes of this analysis, our definition of financial services only includes UK companies in banking & capital markets, insurance, and wealth & asset management sectors
  • Deals include transactions (announced or completed) where the target is in one of the three financial services sectors, and is in the UK
  • There is no minimum disclosed value deal threshold, but deals where less than 20% (disclosed) of the company was acquired have been excluded from this analysis
  • Equity investments were included. Joint ventures were not included
  • An average exchange rate of 1.288 in 2017 and 1.32 in H1 2018 was used to convert USD to GBP
  • The information and opinions contained in this document are derived from public and private sources that EY believes to be reliable and accurate, but which, without further investigation, cannot be warranted as to their accuracy, completeness or correctness. This information is supplied on the condition that none of EY, its member firms or any partner or employee of any thereof is liable for any error or inaccuracy contained herein, whether negligently caused or otherwise, or for loss or damage suffered by any person due to such error, omission or inaccuracy as a result of such supply