Financial services M&A activity is thriving, figures show

Figures collected by Big Four accountancy firm EY have shown that M&A activity in the financial services sector is thriving, with more than 80 deals being completed in the first half of 2018.

The surge in deals comes as a result of financial services firms facing tough competition in the sector, while low interest rates have also contributed to the boost in M&A activity.

Encouraging

The figures showed that 83 deals were made in the first half of the year, bringing the total value to £12bn. Slaughter and May’s Corporate Partner Rob Innes expects the deals to continue into the next six months, but believes that Brexit could cause doubt among some financial institutions.

EY’s UK Financial Services Transactions Leader Gavin Jordan said that the level of M&A is encouraging when taking into account the backdrop of the continued uncertainty over the UK’s exit from the EU and ongoing regulatory change.

Stiff competition is driving consolidation in the financial services sector, with UK challenger banks and digital banks discussing deals. CYBG and Virgin Money are among those that have been in talks, with the two banks recently reaching an agreement that will see them merging in a £1.7bn takeover deal.

Merge

Commenting on the trend of M&A deals among banks, CMC Markets’ Analyst David Madden said: “Virgin Money and Clydesdale, that is sort of out of necessity. If you focus on the retail banking sector, your RBS, Lloyds and Barclays, they are big organisations, you are in a situation where you will find it difficult. Interest rates are low and you are up against well-established, massive high street organisation, so rather than compete with each other you merge.”