Global M&A Trends in Financial Services: 2022 Outlook

Motivated buyers and sellers, a rapidly transforming sector, and a wave of distressed assets signal a dynamic year ahead for financial services (FS) deal-making.

Competition for strategic market advantage continues to fuel mergers and acquisitions (M&A) across FS, with activity led by deals for technology and innovation. Acquisitions and divestitures are expected to gain momentum in the upcoming months, as banks, insurance companies and asset managers seek to optimise cost structures, grow the top line and increase efficiency and margins.

Facing pressure from regulators, disruption from platforms and fintechs, rising interest rates, and continued digitalisation, the sector is primed for transformation. We expect M&A activity to focus on the continued formation of strategic partnerships, ongoing consolidation and a higher level of distressed assets in 2022.

“Strong interest from investors of all kinds will continue to push the financial services M&A market upwards in 2022. In particular, I see potential for distressed assets from the banking and insurance sectors to produce a wave of deals.”

Christopher SurGlobal Financial Services Deals Leader, Partner, PwC Germany

M&A hotspots

We expect the following areas to be mergers and acquisitions hotspots in 2022:

  • Private equity (PE). Abundant PE capital will continue to be deployed to acquire a range of financial services targets, including a growing interest in life insurance and annuities and payments sub-sectors. Specialised PE players that focus on distressed assets are ready to act, as the impact from the pandemic on the real economy is reflected in the balance sheets and assets of FS corporates in the coming months.
  • Divestitures. Continued portfolio optimisation through M&A in the first half of 2022 will prolong a 2021 trend whereby large FS corporates have identified unprofitable or non-core business components to divest. We are already seeing some smaller distressed FS corporate assets being brought to market, with larger deals expected in the upcoming months.
  • Fintechs. Corporate and PE investors continue to be interested in fintech companies at higher multiples in payments, deposit and lending platforms. They are also acquiring insurtech, regtech, financial services IT, and digital assets, such as cryptocurrencies and tokenisation.

M&A activity and values

Financial services deal volumes and values, 2019-2021

Bar chart showing M&A volumes and values globally for the Financial Services industry. Global deal volumes increased by 21% between 2021 and 2020. Deal volumes increased by 40% over the same period, primarily due to a 147% growth in the number of deals with a deal value of $2-5bn.

Sources: Refinitiv, Dealogic and PwC analysis

Financial Services deal volumes and values increased between 2020 and 2021 by 21% and 40%, respectively, and 2022 started with deal activity remaining at elevated levels across all regions. The buoyant M&A environment in the first half of 2021 was helped by some pent-up deal-making demand from 2020 and extended into the second half of the year as optimism increased around the economic recovery, creating a robust deals pipeline. The number of financial services deals which had private equity involvement increased during 2021 to 30%, up from the average over the previous five years of 20%, reflecting the growing importance of PE in the sector.

Deal values were boosted by several megadeals—those with a deal value greater than US$5bn—particularly in the leasing, regional banking, fintech and insurance sectors, and also as a result of the fierce competition between corporates, PEs and special purpose acquisition companies (SPACs) for certain digital and technology targets.

Key themes driving M&A activity

Digital transformation and technology

Digital acceleration shows no sign of slowing down across sectors of the industry, as consumer expectations and operational complexity grow. Technology capabilities remain central to corporate strategies to build market position against the backdrop of disruption from fintechs and non-FS companies.

We expect that M&A, partnerships and strategic alliances in 2022 will be focused on capability-driven deals to leverage data, implement solutions to address rising cybersecurity concerns, drive operational efficiencies, and speed up transaction processes.

capital availability

Embedded finance

Embedded finance, the growing trend whereby businesses can seamlessly integrate financial services into their business models, is set to increase in intensity. As tech giants like Apple, Google and Amazon continue to expand their financial offerings, retailers such as Walmart and Ikea are also making inroads—partnering or making acquisitions which enable them to offer financial services to customers. FS corporates, such as card-issuing banks, are likely to build capabilities through M&A in 2022 to compete with fintechs in growing areas such as the Buy Now, Pay Later (BNPL) space.

Environmental, Social and Governance (ESG)

The asset and wealth management (AWM) sector is leading FS in responding to many of the complexities of ESG, following increased demand for sustainable investments. Now, the insurance and banking sectors are set to play a greater role in providing financial infrastructure to support the green transition: at COP26, a consortium of 450 financial institutions, representing roughly 40% of global banking assets, pledged to align their lending and investing to net-zero emissions by 2050. We expect these actions will redefine both risk management and value creation in the FS industry, as ESG-compliant targets generate significant interest.

Distressed M&A

We anticipate that FS players, particularly banks and insurance companies, will face a degree of market volatility, as state-aid measures end and non-performing loans (NPLs) increase. Increasing demand from specialised investors may foster distressed M&A activities and portfolio transactions, as banks seek to divest NPL assets to optimise their asset base, balance sheet and capital ratios.

As FS players concentrate their operations on domestic and core markets, we also expect increased deal activity in upcoming months related to the sale of non-core and unprofitable businesses and the establishment of run-off platforms for life insurance businesses.

distresses green

M&A outlook for financial services

Pressure to adapt to customers’ changing needs and increased competition in the industry will continue to impact M&A in 2022. Asset and wealth managers are looking to expand into new asset classes, banks are being pushed to modernise by implementing new digital solutions, and insurance companies are looking for opportunities to divest non-core assets or refocus core competencies.

While activity is still largely defined by the consolidation of a highly fragmented industry, new business models are emerging in sub-sectors, especially among fintechs, insurtechs and regtechs. Although targets in these sub-sectors are often highly attractive opportunities, high multiples raise the stakes for investors, who increasingly need to adopt a value-creation mindset to maximise their return on investment.


About the data
We have based our commentary on M&A trends on data provided by industry-recognised sources. Specifically, values and volumes referenced in this publication are based on officially announced transactions, excluding rumoured and withdrawn transactions, as provided by Refinitiv as of 31 December 2021 and as accessed on 2 January 2022. This has been supplemented by additional information from Dealogic and our independent research, and includes data derived from data provided under license by Dealogic. Dealogic retains and reserves all rights in such licensed data. Certain adjustments have been made to the source information to align with PwC’s industry mapping.