PE and asset management deals spur financial services M&A in Q1 2017

A rash of high-priced buyouts and a bid for a popular asset manager ramp up value at the start of the year

The financial services industry saw a 29 percent jump in year-on-year deal value in the first quarter of 2017. It was also the second-highest Q1 since 2011, which augurs well for the year ahead. Deals totalled US$55.8 billion in Q1 2017, compared with US$43.3 billion in the same period last year.

This encouraging figure comes on the back of a steady 2016 in which the value of US$306.3 billion was well above the value in the majority of post-crisis years, but couldn’t match the US$488.2 billion amassed in 2015.

The private equity (PE) sector contributed heavily to financial services’ strong start to 2017. The first quarter saw PE deals worth US$10.4 billion, the highest Q1 buyout total since 2010. Of the top 15 financial services deals, almost a third involved PE, with US firm KKR taking top spot among its peers with its agreement to purchase insurance broker USI Holdings for US$4.3 billion.

The fund/asset management subsector, as a target segment, also was a major contributor to the total as it had its best first quarter since 2013, raking in a total of US$6.4 billion. The biggest deal in the asset management space saw UK-based financial services group Standard Life agree to acquire Aberdeen Asset Management for US$4.6 billion.

There are industry experts who believe that there will be a wave of M&A in asset management over the next year. In an interview with Reuters published April 20, 2017, Larry Fink, CEO of investment giant BlackRock, said: “I believe that you’re going to see a consolidation in our industry… [although BlackRock is] not going to be a big participant.”

As the year progresses, M&A in the financial services sector could also see a big boost from the burgeoning fintech sub-sector. The recent White & Case report Fintech M&A: From threat to opportunity noted that 95 percent of respondents from industries across the sector intended to do a fintech deal in the next 12 to 24 months.

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