Looking ahead to what's in store for the rest of 2018 in the global financial services deal market.
Challenges remain but we expect a year of robust M&A activity in the Financial Services sector as non-sector players - from private equity houses and pension funds to Chinese and Japanese conglomerates - continue to actively pursue deals. At the same time, look for interest in fintech-related deals to remain hot as banks and insurers strategically seek transformational technologies to remain competitive and growing.
We expect the value and volume of M&A deal activity in the Financial Services sector to increase by more than 10 percent for 2018 amid numerous positive factors that include: Strengthening G-SIFIs; proposed removal of barriers to EU bank mergers; increased focus on M&A to drive transformation in insurance; strength of the Asian and US economies; the increasing role of both private equity and new entrants to the market; and rising interest rates.
The year was off to a promising start during the first quarter of 2018, with the value of deals rising to US$78 billion compared to US$55 billion in Q1 2017.
“The ongoing flurry of US-based activity reflects the consolidation of the regional banking sector combined with private equity investors eagerly pursuing financial services assets,” says Stuart Robertson, Global Financial Services Deal Advisory Lead, KPMG in Switzerland. “At the same time, the trend in overseas acquisitions by Japanese
Stuart notes that private equity houses, private investors
The level of private equity dry powder represents a huge opportunity across all regions in 2018, with a focus on deploying funds into all sectors of financial services, Stuart adds.
Regionally, beyond the action in the US, China
“It's noteworthy that in 2017, about three-quarters of bank deals were in their domestic markets and this trend could continue, along with deals involving NPLs predominantly involving international buyers. At the same time, the intense focus on
For additional insights into global 2018 M&A banking trends, please see KPMG's Continuing to Climb report.
On the insurance front, says Ram Menon, Global Insurance Deal Advisory Lead, KPMG in the U.S., there is also an abundance of capital to invest and insurers will continue to chase inorganic growth opportunities. “We expect 2018 deal activity to be very strategic, as the insurance industry - like the entire financial services sector - faces
The number of deals for the sector overall in 2017 was relatively flat at 3,020 compared to 3,072 in 2016, while the value of 2017 deals was US$253 billion, down 20 percent from US$318 billion in 2016. Results are in line with our 2017 Predictor outlook that noted continued pressure on the banking sector amid issues that included Basel IV, a general lack of capital and a large legacy on the non-performing loan side for the next few years.
The volume of 2017 deals in insurance was relatively flat (down 0.7 percent) while the value of deals increased by 128 percent. The 128-percent increase in insurance is largely the result of one megadeal that also proved to be the biggest deal of 2017 in the Financial Services sector. (Source: MergerMarket, KPMG analysis)