The Top Four Trends Affecting Mergers And Acquisitions In The Financial Services Industry In 2024
In the first of our new IMAP M&A Industry Insights video series, we hear from Richard Tunney and Andrew Kemper who take a deep dive into the Financial Services Industry and outline the Four Key Trends affecting M&A activity in the sector this year:
Trend 1. PE Involvement in Financial Services Deals Increasing Globally
- Increasing investment by Private Equity, particularly in areas such as insurance and non-bank lending
- Cash generation and barriers to entry are key drivers - particularly regulation and market penetration
- Insurance sector very attractive - low cap-ex, cash generation nature of businesses, and long-term client relationships
Trend 2. Growing Number of Transactions in the Insurance Segment
- While deal volume was down in 2023, 600 deals valuing $20 billion were closed
- The AON takeover of NFP accounted for $13 billion in enterprise value alone
Trend 3. Regulation Forcing Consolidation
- Regulatory burden impacts smaller businesses, driving consolidation
- In Ireland, the UK, and across the EU, the regulatory burden continues to grow
- Smaller businesses forced to scale-up compliance teams and risk management see their net margins impacted
- Strategics generate cash, creating opportunities for M&A
- Interest rate environment has been transformative for cash generation over last 18-24 months
Trend 4. M&A an Attractive Solution for Banks Sitting on Cash
- Exponential net interest margin growth in Irish/UK banks causing shareholder pressure for capital distribution or M&A
- Large banks in Canada have consolidated market share; less concern regarding competition and opportunities for M&A
