Tuesday 13 July 2021 2:33 pm

Exclusive: Financial services deal making climbing back up after subdued 2020

Deals in the UK financial services sector more than doubled in the first half of 2021, compared to the first six months of last year.

Professional services giant Ernst & Young told City A.M. today that the UK financial services industry saw 121 deals in the first half of this year compared with 57 during the same period in 2020.

The figures shared by EY were in relation to deals in which there was either a UK target or a UK acquirer.

Despite this surge in the number of deals, the total value more than halved from £32bn to £13bn when comparing the first half of 2021 with the same period last year.

But EY said the bumper figure from 2020 was largely due to a single big insurance transaction in 2020 – that of the £27.1bn acquisition of Willis Towers Watson by Aon.

As a result insurance deals saw the greatest fall in terms of value, from £29bn to £4bn – but the number of deals rose from 18 to 33.

Wealth and asset management transactions

The number of wealth and asset management deals jumped by more than three times the 17 deals in the first half of 2020, to 62 in 2021. The total deal value also saw a “strong increase” from half a billion to £6bn.

In the banking sector there were 26 deals in 2021, up slightly from 22 in 2020 and deal value also rose marginally from £2.4bn to £3bn year on year.

The number of non-UK firms acquiring UK ones also rose, from 13 to 32, with total value increasing from £1.2bn to £6.8bn.

Both the number and value of deals in which UK firms acquired overseas businesses was lower – but both saw increases. The number of deals rose from 22 to 29 with deal value increasing from £2.1bn to £2.4bn.

M&A activity is expected to continue to improve in the second half of 2021 as the economic recovery accelerates.

EY Strategy and transactions leader Tom Groom said the rise – which followed a subdued year for deals barring a single high-value transaction – “is perhaps testament to the positive sentiment around the large-scale vaccine roll-out and the knock-on impact on economic recovery.”

The pandemic, he acknowledged, challenged operating models and financial resilience but he noted that the role of the vaccine roll out in the UK in underpinning an economic recovery.

Groom said: “Financial services firms have been addressing the numerous challenges they have faced over the past 18 months, and in some cases M&A has been – and will continue to be – the answer.”

He said he expects the trend in the rise of M&A deals to continue through the rest of 2021 but admitted that were still risks to the recovery. His comments come as the government increasingly withdraw financial support but even while acknowledging these concerns, Groom said “these challenges will likely drive further M&A activity in the market.”