2016 Financial Services M&A Predictions: Rising to the challenge

2016 Financial Services M&A Predictions: Rising to the challenge

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  2016 Financial Services M&APredictions Rising to the challenge
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  2016 Financial ServicesM&A Predictions Rising to the challenge Over the course of 2015 we have seen 3 key trends that we expect to continue during 2016 and drive M&A activity Financial Services Industry M&A announced by Q3 2015 £265.1bn
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  Market disruption The useof technology to anticipate or avoid loss events has the potential to disrupt the general insurance market In the investment management sector direct to consumer digital channels are growing rapidly whilst ‘robo’ advice offerings aim to commoditise higher value services Health Home Motor 42% 22% 33% 16% 35% 29% 25-34 All customers 650 150250 IFAs (F2F) High end wealth and banks (F2F) D2C Proportion of customers who would like a service that detects potential issues or problems and provides assistance, by age UK retail assets under management by channel, 2014 (£bn)
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  Market disruption Internet andmobile phone penetration has transformed consumer financial activity and is driving the uptake of new banking services such as peer to peer lending and new payment products such as Apple Pay of UK adults with a smartphone by May 2015 76%
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  Size matters (Re)insurers arelooking to consolidation to help break out of the vicious circle they face – 2015 has seen in excess of $100bnof deals in the global (re)insurance industry Global financial crisis (Re) insurers 6. Low global economic growth 2. Alternative capital 1. Low interest rate environment 3. Reduced Cat losses 4. Rate deflation 5. Regulatory costs Investment management sub-sectors such as wealth managers, distributors and platforms are experiencing consolidation driven by: • Consolidation of the long tail of wealth managers with less than £5bn of AUM in the UK • Interest from private equity and larger financial institutions • Strategic impacts of margin pressure and increased fee transparency
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  Size matters Challenger bankshave outperformed the incumbents on a RoTE basis making them attractive acquisition targets, with purchasers either being other challengers or foreign owned banks looking for a foothold in the UK 14.3%Average RoTE for challenger banks in FY14 compared to an average of 0.8% for incumbents
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  Regulation Capital shortfall againstEBA risk based requirements and leverage ratio at September 2015 €29.2bn New regulations are expected to force Financial Services institutions to re-evaluate their business models, plans and balance sheets to make sure they are in the best possible position to deal with these changes and take advantage of the opportunities presentedBasel III CRD IV Section 166 SII IFRS 9 Banking surcharge FCA EBA RDR MiFID Pension reforms
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