Zooming into M&A in the Financial Services industry

  • 32% of their corporate responses indicate that they are thinking about a divestment
  • To boost their market share, larger financial institutions have started purchasing smaller businesses
  • They use, for example, technology-driven M&A deals.

Mergers and Acquisitions (M&A) have been a key aspect of the financial industry for decades, and their significance has only increased with time. The past few years have seen an increase in M&A activity, let’s zoom in on the financial institutions sector to make it more specific. The current state of M&A in the financial industry is characterized by several notable trends, and experts are optimistic about the future of M&A in the financial sector.

What are trends in the current M&A market?

The current state of M&A in the financial industry is marked by several trends, including:

  1. Increased activity: Today's M&A activity involves more than just acquisitions. Additionally, the number of divestitures is increasing, and more executives say they are open to trying out new tactics. According to a study by Deloitte1 in January 2022, 92% of their respondents believe that during the upcoming 12 months, deal volume will either rise or remain stable, 32% of their corporate responses indicate that they are thinking about a divestment and 57% have completed a divestment in the previous 12 months, according to corporate replies. Deal-making activity—acquisitions, divestitures, and alternative M&A strategies—will provide crucial levers for firms as they continue to negotiate regulatory tightening and a dynamic economic environment, deal-making executives are sending out loud and clear signals.

  2. Consolidation: To boost their market share, larger financial institutions have started purchasing smaller businesses, which is a trend in the financial industry. The need for these businesses to remain competitive and provide their clients with a larger selection of goods and services has been the driving force behind this. This is already happening in the industry and can occur between companies within the same industry or sector, or it can occur between companies from different industries. For example, a large tech company might acquire several smaller tech companies in order to expand its product offerings or reach new markets. Similarly, a financial services company might acquire several other financial services companies in order to expand its customer base or improve its operational efficiency.

  3. Focus on technology: The financial industry has been quick to embrace technology, and M&A activity has reflected this. Many financial companies have acquired technology startups to enhance their digital offerings and improve their operational efficiency. They use for example, technology-driven M&A deals. These deals involve the acquisition of technology companies, or the acquisition of technology assets, such as patents, software, and data. Another way the M&A industry is focusing on technology is through the use of technology to support the M&A process itself. For example, the use of artificial intelligence and machine learning algorithms.

The future of M&A in the FS sector

The future of M&A in the financial industry looks promising, with several key factors that are likely to drive increased activity in the coming years. These include briefly:

  1. Growth of the financial sector: According to PwC2, M&A is and will remain a key factor in the transformation of the financial services (FS) industry as incumbents search for strategic alliances and merger possibilities to advance their digital capabilities, fend off competition from platforms and fintechs and cope with mounting regulatory pressure.

  2. Continued emphasis on technology: M&A activity is anticipated to reflect the continued importance of technology in the banking sector. To improve their digital products and stay competitive, businesses will continue to buy up technological firms.

  3. Regulatory changes: Changes in regulations, particularly in the wake of the COVID-19 pandemic, are likely to drive increased M&A activity in the financial industry. Companies will look to acquire firms that are better positioned to comply with these regulations and this is likely to result in increased M&A activity.

In conclusion, the current state of M&A in the financial industry is characterized by increased activity, consolidation and a focus on technology. The future of M&A in the sector looks promising, with continued growth in the financial sector, a continued focus on technology and regulatory changes all likely to drive increased M&A activity in the coming years.

International M&A firms doing deals particularly in the financial institution sector in The Netherlands are for example, JP Morgan Chase & Co, Goldman Sachs, Bank of America, Morgan Stanley, Citigroup, Credit Suisse, Barclays, Deutsche Bank, UBS and RBC Capital Markets. Also there are smaller companies especially M&A oriented like Aphergis and of course, Big Four companies have some activities in the M&A industry. Finally, large banks like ABN AMRO and ING have a dedicated M&A team focused on financial institutions.

As a student at the beginning of a professional career… 

How can you take the above developments into account? First, it is important to keep informed about the industry. What are the latest developments? This can be done by reading newsletters or participating in online discussions, for example. Second, take M&A-related courses and seek internships at M&A-related companies. The latter in particular can help build a network and gain practical knowledge and skills. Finally, talk to industry professionals. Students can approach M&A industry professionals for advice and insights. This can help build contacts and get a better understanding of the industry.

Does the M&A industry sound appealing to you? 

Or have you (soon) completed your Master's degree in Finance or similar, but are not sure yet what suits you best or what opportunities are available? Let Young Financials and FSR help you! 

Young Financials guides starters and young professionals to jobs in the Dutch financial sector. Check out our Young Financials website, Finance Traineeship or apply now for one of our Finance jobs for an informal interview! 

Interested in meeting M&A firms? The FSR M&A days will take place on April 5th & April 6th. The days will consist of the visitation to Nielen Schuman, Oaklins, Roodhals and IMAP and where you have the chance to work on real-life cases and put your Corporate Finance skills into practice! The M&A days will also give the opportunity for students to meet with employees and extend their network.

Please note that the application deadline is the 26th of March.

                                                                                                          Apply now! 

1Deloitte. (2022, january). The future of M&A. Retrieved February 12, 2023, from https://www2.deloitte.com/content/dam/Deloitte/us/Documents/mergers-acqisitions/us-deloitte-2022-mna-trends-report.pdf
2PricewaterhouseCoopers. (n.d.). Global M&A Industry Trends in Financial Services: 2023 Outlook. PwC. Retrieved February 12, 2023, from https://www.pwc.com/gx/en/services/deals/trends/financial-services.html
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