data in detail financial services m&a global trends · 7 alawwal bank saudi british bank middle...

Data in detailFinancial services M&A global trends

Based on Mergermarket data, 2018 saw a slight dip from the levels of activity seen in 2017 in the global FS M&A markets, although there were still pockets of high activity. 2018 was again hallmarked by a small number of mega-deals, including, for example, the private fundraising by Ant Financial which has really brought into focus the potential size of the FinTech market.

Headlines

Deals by sector

AllNumber of deals

1,463(*1,429)

Largest reported deal

(£million)

£10,744

Volume (£million)

£220,619(*£262,750)

Banking

Number of deals

274(*287)

Number of deals

386(*418)

Volume (£million)

£54,004(*£102,308)


(£million)

£10,744

Fund management

Number of deals

232(*238)

Volume (£million)

£26,634(*£24,917)

Volume (£million)

£66,272 (*£79,026)


(£million)

£3,636

Insurance & related


(£million)

£4,371

Figure from 2017

Figure up on 2017

Figure down on 2017

Figure same on 2017

*

=

2


Number of deals

29(*30)

Number of deals

57(*49)

Number of deals

104(*95)

Number of deals

22(*18)

Number of deals

329

Number of deals

30 (*29)


£2,402


(£million)

£1,582


(£million)

£10,549


(£million)

£398


(£million)

£385


(£million)

£630

Principal Finance

Volume (£million)

£1,709(*£3,836)

Volume (£million)

£8,420(*£8,645)

Volume (£million)

£9,064(*£11,369)

Volume (£million)

£1,126(*£1,434)

Volume (£million)

£51,793

Volume (£million)

£1,597(*£1,656)

Investment Broking

Private Equity

Other

Securities commodities

& broking

Investment Banking


3

Only 40 fewer deals were announced in 2018 than in 2017, although with an average reported deal size of £270m, compared against £317m in 2017, the values being traded in the FS market were smaller. Volumes have therefore held up well looking over the period back to 2015 but the total value has materially dropped in 2018.

As in previous years, the US was the largest market for FS M&A deals in terms of volume, representing roughly a third of all M&A deals in the FS space and four of the ten largest deals in 2018. Slightly more deals were completed in Europe, although with a lower aggregate value. Equally, compared to 2017 Europe experienced a year in which more deals were done but with a lower aggregate value.

2015 2016 2017 2018

289,790

230,804

262,750

220,619

1,481

1,456

1,429

1,463

200,000 1,400

1,420

1,440

1,460

1,480

1,500

220,000

240,000

260,000

280,000

300,000

Year-on-year

Va

lue

(£m

illi

on

) Nu

mb

er o

f de

als

4


Coming into 2019, we expect to see fewer larger deals in the financial services market, particularly in the insurance sector where significant consolidation in the P&C/ non-life market has already happened. However, we could see further consolidation in the life insurance sector in Europe and expect this market to be quite busy.

Private equity will continue to play a large role in financial institutions M&A across the globe (particularly in Europe and the US, as we have seen in the past year). As global financial institutions solidify their strategies we also expect to see a greater number of Fintech and InsurTech deals and for these deals to really increase in value.Hugo Laing, Partner

Data in detailFinancial services M&A global trends in 2018

5

Middle East

£3,636m (*£1,161m)

£4,180m (*£3,557m)

11 (*15)

Deals by geography 2018

Number of deals

Location Volume (£million)

Largest reported deal (£million)

Key

£60,414m (*£117,185m)

£4,371m (*£50,235m)

United States

475 (*490)

6


Asia

UK & Europe

207 (*217)

£47,968m (*£38,545m)

£10,549m (*£5,774m)

Global

Number of deals

1463 (*1,429)

Volume

£220,619m (* £262,750m)


£10,744m (*£50,235m)

483 (*455)

£52,341m (*£68,711m)

£5,105m (*£5,860m)

7

* Figure from 2017

Figure up on 2017

Figure down on 2017


77

Top ten global deals

Target company Acquirer RegionValue

(£million)

1 XL Group Ltd AXA SA US (Bermuda) 10,744

2 Ant Financial Services Group Consortium Asia 10,549

3 Jardine Lloyd Thompson Group PlcMarsh & McLennan

Companies, Inc.Europe 5,105

4 OppenheimerFunds, Inc. Invesco Ltd. US 4,371

5 Nex Group Plc CME Group Inc Europe 4,070

6 Validus Holdings, Ltd.American

International Group Inc.

US (Bermuda) 3,998

7 Alawwal Bank Saudi British Bank Middle East 3,636

8 MB Financial Inc Fifth Third Bancorp US 3,395

9 Vebnet (Holdings) plc; Standard Life Assurance Limited

Phoenix Group Holdings Limited

Europe 2,930

10 Quilter plc Old Mutual plc Europe 2,487

Note: These are the largest deals based on Mergermarket’s announced deal values. There may have been larger deals where the value was not disclosed.

8



9

Number of deals

132(*124)

Volume (£million)

9,746 (*17,448)

Insurance & related

UK and EuropeDeals by sector

Number of deals

5(*7)

Number of deals

92(*90)

Number of deals

93(*92)

Volume (£million)

733 (*591)

Volume (£million)

728(*690)

Volume (£million)

18,567

Volume (£million)

6,175(*10,574)

Volume (£million)

14,660(*22,286)

Other

Private equityBanking

Fund management

Number of deals

= 8(*8)

Volume (£million)

263 (*266)

Investment Banking

Number of deals

8(*9)

Volume (£million)

149 (*229)

Investment Broking

Number of deals

27(*23)

Volume (£million)

1,320 (*3,752)

Principal Finance

Securities, commodities and broking

Number of deals

12(*9)

Number of deals

106

Number of deals

483(*455)

Volume (£million)

52,341(*68,711)

AllFigure from 2017

Figure up on 2017

Figure down on 2017

Figure same on 2017

*

=

10


European deal volumes were up compared to 2017, although with a lower aggregate value. However, the acquisition of XL Group Ltd by AXA and the JLT group by Marsh & McLennan of the US, the first and third largest FS deals of the year globally by value, and a host of other cross-border acquisitions show that the European market is still an important market for M&A and there are pockets of the market where activity is set to increase significantly.

Banking still leads the way as the main area of activity in the FS space across Europe. In the UK, whilst the largest retail banks (Barclays, Lloyds, HSBC, Royal Bank of Scotland and Banco Santander) are already of a size not to require further consolidation, we have seen the further growth of the challenger banks which may be getting to the size where they need to acquire to continue growing. We saw the Clydesdale and Yorkshire Bank Group acquired Virgin Money and expect there will be more M&A activity by the smaller and challenger banks over the next 12 months.

FinTech was a buzzword in 2017 and this continued through into a strong 2018. The development in the RegTech, InsureTech and LegalTech spaces, combined with the growth of the payment services all suggest that this is an area of the FS market which will remain strong through into 2019.

Following the large mergers which featured during 2017, such as the takeover of Aberdeen Asset Management by Standard Life, asset management has seen a comparatively quiet year. As with all of the FS industry, attention has been given to preparations for a no-deal Brexit which will have undoubtedly had an impact on the appetite for deals.

Insurance M&A has been dominated in the last year by a number of very large deals. On the non-life/ P&C side, there were a number of large deals involving London market players, including the sale of Aspen to Apollo, the sale of Chaucer to China Re and of course, the sale of XL

Group to AXA, the largest deal by announced value for the year. Whilst we expect to see more M&A focussed on the Lloyd’s market we expect the deals to drop in size, with smaller players being consolidated.

On the life side, there was the £12bn acquisition of Prudential’s back-book annuity portfolio by Rothesay and the acquisition of Standard Life’s insurance business by Phoenix. There was also the acquisition of Equitable Life by the Life Company Consolidation Group.

There have been a significant number of back-book deals in the life sector in the UK and across Europe. PE backed groups have focussed on these targets as life groups look to release capital in order to develop new business and where the effects of Solvency II make certain lines of business expensive to run-off. We expect to see significant further consolidation of the European life market over the next 12 months.

Looking ahead, as was the case in 2018, we expect the financial services industry will be focussing on the potential implications of a no-deal Brexit in the early part of 2019 and potentially beyond. The need to adapt businesses to the post-Brexit landscape will occupy at least some of the energy of the European financial services industry and will distract from M&A activity. The main drive of deals in non-core business units seems to have passed for the time being, and we anticipate that the coming year, much like the last, will be dominated by a smaller number of large strategic acquisitions.


11

United States

Number of deals

77(*84)

Number of deals

= 14(*14)

Number of deals

0(*9)

Number of deals

30(*28)

Number of deals

187

Volume (£million)

113(*739)

Volume (£million)

10,203

Volume (£million)

280(*2,821)

Volume (£million)

0(*562)

Volume (£million)

2,858(*2,620)

Volume (£million)

13,334(*19,845)

Volume (£million)

24,828

Private equityBanking

Fund management

Insurance & related

Investment Banking

Investment Broking

Principal Finance

Number of deals

4(*5)

Number of deals

72

Number of deals

82(*67)

Volume (£million)

8,766(*6,192)

Other


Number of deals

9(*0)

Volume (£million)

32(*0)

Number of deals

475(*490)

Volume (£million)

60,414(*117,185)

AllDeals by sector

Figure from 2017

Figure up on 2017

Figure down on 2017

Figure same on 2017

*

=

12


The US financial services industry had a busy 2018 albeit down from the year before. M&A activity in the financial services sector involved traditional participants and non-sector players, such as private equity firms, pension funds, large tech companies and foreign conglomerates.

We saw the abundant capital held by private equity firms pouring into the financial services space. Just to name a select few of the transactions, at the beginning of the year, Kohlberg & Company bought US Retirement and Benefits Partners from Centre Partners and a private equity investors group led by Apollo Global Management bought a majority stake in OneMain Holdings, Inc., a consumer finance company offering personal loan products. Later in the year, a consortium including Apollo, Crestview Partners and Reverence Capital Partner bought Voya Financial’s variable annuity business. Another group of private equity investors bought Hartford’s run-off annuity business in Talcott Resolution. Towards the end of 2018, Further Global announced its acquisition of Global Benefits Group, an integrated provider of international benefits insurance. As the new US tax law became effective at the end of 2017, together with the changing capital standards for insurers, many global insurance companies in 2018 began to restructure their businesses to avoid US BEAT tax or to increase

capital efficiency. Some of the traditional insurers also partnered with private equity funds to gain access to capital. After the dust somewhat settled on the new tax law, US insurers have been busy buying and selling insurers or blocks of in-force life or annuity business. Several large insurers are in varying stages of selling their life and annuity businesses. Looking forward, we think there will be continued activity in the life, health and annuity space, whether in new business reinsurance or in force business transaction and more broker-dealer consolidations. Companies with long-term care business will always look for a way to contain or offload their risks. The uncertain political environment however may dampen the M&A fever we saw in 2018 and 2017.


13

Asia

Number of deals

207(*217)

Number of deals

5(*6)

Number of deals

41(*24)

Number of deals

30(*24)

Number of deals

18(*16)

Volume (£million)

47,968(*38,545)

Volume (£million)

12,505

Volume (£million)

154(*5)

Volume (£million)

7,980(*7,613)

Volume (£million)

655(*807)

Volume (£million)

8,698(*5,392)

Volume (£million)

1,134(*753)

Volume (£million)

3,700(*3,853)

Private equity

BankingInsurance & related

All

Investment Banking

Investment Broking

Principal Finance


Number of deals

44(*42)

Volume (£million)

10,576(*6,105)

Number of deals

29

Number of deals

5(*1)

Number of deals

10(*12)

Other

Number of deals

25(*29)

Volume (£million)

2,566(*2,861)

Fund management

Deals by sectorFigure from 2017

Figure up on 2017

Figure down on 2017

Figure same on 2017

*

=

14


We have generally seen an uptick in financial services deal activity against the previous year (in terms of value), with private equity buyouts in particular being active. The relaxation of regulations pertaining to foreign investment in the Chinese banking sector by the China Banking and Insurance Regulatory Commission (CBIRC) have helped to open up the Financial Services sector. The new rules include investor friendly reforms such as removing foreign ownership caps in Chinese banks, asset management and wealth management companies.

The regulations have also made it easier to allow foreign banks to establish and maintain branches and wholly foreign-owned banks at the same time. Whilst the Chinese market in particular remains difficult at times to navigate for foreign investors, it is hopeful that the initiatives will encourage further growth in 2019. One of the standout deals of the region is Mitsubishi UFJ Trust and Banking Corporation’s purchase of the Commonwealth Bank of Australia’s global asset management business. The deal establishes Mitsubishi as the largest asset manager in the Asia-Oceania region and is part of their wider aim to become an industry leader in Japan and significant global player.

In Hong Kong, the insurance industry is continuing to face investment opportunities as highlighted by the US$2.75 billion acquisition of FTLife Insurance Company Limited by NWS Holdings Limited (a Hong Kong listed subsidiary of New World Development Company Limited which is controlled by the Cheng family) from Tongchuangjiuding Investment Management Group Co., Ltd (also known as JD Capital), a Beijing-based financial holding firm, which was announced in December 2018. JD Capital had acquired FTLife (which was formerly known as Ageas Insurance Company (Asia) Limited) from Belgian insurer, Ageas N.V., for US$1.4 billion

in August 2015. The FTLife acquisition by NWS is the biggest insurance deal to be completed in Hong Kong to date and eclipsed the US$1.64 billion acquisition of MassMutual Asia, the Asian unit of US-based Massachusetts Mutual Life Insurance, by Yunfeng Financial Group (backed by Alibaba Group Holding co-founder and executive chairman, Jack Ma Yun) in 2017. In 2018, UK insurer, Aviva plc, and its Chinese partners, internet and technology enterprise Tencent Holdings Limited and private equity fund Hillhouse Capital, received Hong Kong regulatory approval to launch a digital insurer, Blue, which allows customers to buy term life and critical illness products directly online which is a significant change in a market which has been largely dominated by intermediaries. Aviva plc had sold a 80% interest in Aviva Hong Kong (trading as Blue) in 2017. Hong Kong is one of Asia’s largest and fastest growing insurance markets, and it is anticipated that in 2019 Hong Kong will continue to be a favoured destination for Mainland Chinese and overseas investors who are looking for access to comprehensive world-class financial product coverage.


15

Middle EastDeals by sector

Number of deals

0(*2)

Number of deals

0(*1)

Volume (£million)

190

Volume (£million)

197(*227)

Volume (£million)

0(*16)

Volume (£million)

0(*212)

Insurance & related

Investment Broking

Principal Finance

Number of deals

3

Number of deals

1(*2)

Other

Number of deals

= 2(*2)

Volume (£million)

4(*340)

Fund management

Volume (£million)

3,789(*2,739)

BankingNumber of deals

=5(*5)

All

Number of deals

11(*15)

Volume (£million)

4,180(*3,557)

Figure from 2017

Figure up on 2017

Figure down on 2017

Figure same on 2017

*

=

16


Regional reforms across the Middle East have recently been focusing on transforming the M&A environment to attract foreign investment. M&A activity in the Middle East looks to be outward looking in nature, with business leaders looking to strategic joint ventures and with foreign investors. The push to move away from oil and infrastructure investment has led to a diversification of investment opportunities, which looks to be especially beneficial to the FinTech sector.

The desire to seek organic growth of Middle Eastern ventures has been supported by the introduction of investor friendly reforms, in particular, the relaxation of foreign ownership of shares and direct trading regimes. One of the largest Global M&A deals reflects this trend, in the merger of the Saudi British Bank with Alawwal Bank, with HSBC as the

largest shareholder holding almost 30 per cent of the shares in the merged entity. On completion, the merged entity will create Saudi’s third largest lender. In addition, in the UAE, digitisation is the key focus over the next few years, with financial services, technology and retail high on the agenda.


17

Our global offices

18


Key contacts

Rachel BroquardPartner, Corporate

+44 207 919 0609rachelbroquard @eversheds-sutherland.com

Mike VoynichPartner, Corporate

+1 404 853 8329michaelvoynich @eversheds-sutherland.com

Jon Cox-BrownPartner, Corporate

+44 115 931 7692jonathancoxbrown @eversheds-sutherland.com

Cynthia KrusExecutive Partner, Global Executive Management Team

+1 202 383 [email protected]

UK & Europe

United States

AsiaMiddle East

Hugo LaingPartner, Corporate


Steve BoehmPartner and Head of Capital Markets and Investments Team


Dickson NgPartner

+852 2186 [email protected]

Zeid HananiaPartner, Corporate


Paul PughPartner, Company Commercial


James CainPartner, Corporate Transactional and Regulatory Compliance


Ling LingPartner, Financial Services



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data in detail financial services m&a global trends · 7 alawwal bank saudi british bank middle...

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