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Global M&A Trends in Financial Services: 2021 Mid-year Update

M&A across financial services is booming as both new and postponed deals enter the market.

Competition for strategic market advantage continues to fuel mergers and acquisitions (M&A) across financial services (FS) sectors, with activity in the first half of 2021 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 top-line growth, and increase efficiency and margins. As such, transformation is very much front of mind for dealmakers’ overall strategic rationale.

Buffeted by persistent low interest rates and pressure from regulators on one side and disruption from platforms, FinTechs, and continued digitalisation on the other, the sector needs to evolve to meet these challenges. A key facet of M&A activity is likely to be the continued formation of strategic partnerships as well as an ongoing consolidation. Moreover, we continue to expect distressed M&A in the coming months as COVID-related aid programmes end and the implications become clearer for bank loan books and closed blocks from insurance companies.

In marked contrast to previous economic crises, a strong buy-side is being led both by a growing number of private equity (PE) investors and further motivated market players, including FS corporates, seeking to invest in the recovery through M&A activities. This is creating a deal-making landscape with many opportunities for mergers, acquisitions and divestitures, both domestically and cross-border.


“Private equity’s dry powder and willingness to participate in the growth phase during recovery is pushing multiples and purchase prices further upwards—consequently many financial services corporates will likely accelerate their transformational disposal activities.”

Christopher SurGlobal Financial Services Deals Leader, Partner, PwC Germany

M&A hotspots

We expect the following to be M&A hotspots in the during the next six to 12 months:

Private Equity

  • The opportunity for PE players to participate during the recovery is likely to be significant, given their billions of dollars of dry powder. Their focus is likely to range from targets with a heavy balance sheet to those prioritising scalable and technology-driven targets.
  • We expect PE firms will continue their push into the insurance sector, specifically in the life insurance and annuity space, and to continue to invest in the payments sub-sector.

Divestitures, carve-outs and spin-offs

We expect portfolio redefinitions to be a key driver of M&A activity in the second half of 2021, continuing a trend seen during the first half of the year whereby large FS corporates are identifying unprofitable or non-core business components to divest. 

  • This strategy enables companies to focus on their core business and unlock capital for further investments in innovation. The sale of assets, portfolios or non-core businesses will also strengthen balance sheets and improve capital returns.
  • In many cases, these divestitures or spin-offs involve complex carve-out structures. 

FinTechs continue to attract investors

  • FinTech investors, whether corporates, PEs, venture capital funds, or special-purpose acquisition companies (SPACs), continue to be interested in acquiring FinTech companies in payments, deposit and lending platforms. They’re also acquiring InsurTech, RegTech, financial services IT and digital assets, such as cryptocurrencies and tokenization.
  • These deals are broadly either strategic, to increase digitalisation as part of a business-model transformation, or they are financially driven, to generate returns over a short- to mid-term investment horizon with FinTech portfolio companies.
  • As customers migrated to digital channels during the pandemic, many FinTechs benefitted from the increase in demand. This has led to higher valuations in the sector, as FinTechs have greater access to funding and alternative exit opportunities, including initial public offerings (whether traditional IPOs or SPACs) or a direct sale to a corporate or PE investor.

M&A trends in the first half of 2021

Global Financial Services Deal Volumes and Values

Bar chart showing M&A volumes and values globally for the Financial Services industry. After the pandemic-driven drop in the first half of 2020, deal volumes recovered beyond pre-pandemic levels in the second half of the year. They decreased slightly in the first half of 2021 and are hovering at healthy pre-pandemic levels. Deal values peaked well above pre-pandemic levels in the first quarter of 2021, aided by megadeal activity, before falling back in the second quarter as only 1 megadeal occurred.

Source: Refinitiv, Dealogic and PwC analysis

The significant uptick in M&A deal flow in the sector that began in the third quarter of 2020 continued into the first half of 2021, with deal activity remaining at elevated levels across all regions. The buoyant levels of M&A activity are partly due to some deals which were postponed as a result of the pandemic now coming to market and partly due to increased optimism around the economic recovery. The number of deals which involved a PE fund increased during the first six months of 2021 to 36% of deal volume, a marked increase compared with a long-term average of 25%.

The highest deal values were in the Americas, primarily due to several megadeals—deals with an announced deal value of US$5bn or more—particularly in the leasing, regional banking, FinTech and insurance sectors. Notably, SPACs were involved in four of the megadeals announced during the first half of 2021, highlighting how significant these acquisition structures have become in the FS industry. The increase in deal values is also due to the competition between corporates, PEs and SPACs for certain digital and/or technology-focused targets.

Key themes driving M&A activity

Digital transformation & technology

Digital acceleration shows no sign of slowing down across sectors of the industry, as consumer expectations and operational complexity grow. Deals and partnerships in this space are likely to rise as FS players look to M&A to leverage data, drive operational efficiencies and speed up transaction processes. They will also look to implement more robust solutions to combat rising issues of cybersecurity.

An important aspect of digital transformation, particularly in the banking sector, is the transition of back offices from cost centres to profit centres. Technological solutions will open up new opportunities for external investors, such as PE funds and the big technology players. Technology capabilities are also central to corporate strategies to build market position against the backdrop of disruption from FinTechs and non-FS companies.

capital availability

Disruption of traditional business models

Embedded finance, the growing trend whereby businesses can seamlessly integrate finance services into their business models, is set to increase in intensity. As tech giants like Apple, Google and Amazon continue to expand their offerings into the finance space, FS corporates will look to build their capabilities through deal-making and acquisitions of start-ups.

M&A will also be driven by the need for corporates to compete with FinTechs, whose business models may not be subject to the same regulations as traditional FS companies, especially in regard to profitable parts of the banking value chain.

Furthermore, consolidation and collaboration in the industry is expected to continue to rise, particularly across retail banking players, as low interest rates, regulation, and business models reliant on heavy operating costs affect profitability.

young boy

ESG: A success factor in transactions

ESG criteria continue to redefine risk management and value creation in the FS industry. FS deals around sustainability reflect the desire to acquire ESG assets and know-how. Alongside this, clear ESG reporting and credentials will only become more important in M&A transactions, as regulations tighten across jurisdictions and investors seek out ESG-compliant opportunities.

Asset and wealth management (AWM) is the leading FS sector in this transformation, where consumer appetite for sustainable investments has had a significant impact on business strategy, reputation and performance. We expect ESG to ripple through the deals side of the industry in the coming months, as risk weightings may increase on non-ESG compliant products and the insurance sector continues with its own sustainable transformation.

solar energy

Distressed M&A

While the amount of distressed assets that will emerge in the second half of 2021 is not yet known, we anticipate that FS players, particularly banks and insurance companies, will face a degree of market volatility, as state aid measures are withdrawn and the impact of the pandemic is felt more acutely.

We expect banks will be subject to increased levels of non-performing loans (NPLs). With strong demand from specialised investors, this may foster distressed M&A activities and portfolio transactions, as players seeking to divest these assets aim to optimise capital ratios.

As FS players move to 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

Financial services M&A mid-year outlook

As the end of the year approaches and government support measures run out, distressed M&A activity may accelerate as customers/investments in the real economy face liquidity challenges. In banking, we anticipate M&A opportunities related to asset quality and NPLs, as they begin to emerge in certain sub-sectors; in insurance, deals are expected to be linked to the potential for more closed blocks and life-run-off businesses.

However, flush with capital, dealmakers in certain areas of financial services are picking up the pace. And 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. These are becoming highly attractive opportunities for investors, who will need to adopt a value-creation mindset to ensure successful deals.


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 30 June 2021 and as accessed on 5 July 2021. This has been supplemented by additional information from Dealogic and our independent research. This document 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. We define megadeals as transactions with a deal value greater than US$5 billion.

Contact us

Christopher Sur

Christopher Sur

Global, EMEA and Germany Financial Services Deals Leader, Partner, PwC Germany

Matthew Phillips

Matthew Phillips

China and Hong Kong Financial Services Leader, Partner, PwC Hong Kong

Francesco Legrenzi

Francesco Legrenzi

Global and EMEA Asset & Wealth Management Deals and Strategy Leader, Partner, PwC Italy

Michael Mariani

Michael Mariani

Principal, PwC United States