Financial Services Industry

Q4 2023: Mergers and Acquisitions Trend Report

Industry Overview

• The Financial Service Industry (FSI) is made up of 3 categories: personal, consumer, and corporate. The threat of big tech companies and the shift toward new technology are significant factors influencing the industry.
• FSI is the primary driver of a nation’s economy and makes up one of the most valuable and leading drivers of general economic activity worldwide. The strength of a country’s FSI is directly linked with its prosperity and world position.
• The FSI is primarily dominated by large conglomerates, but it also includes a diverse range of smaller, more regional companies.
• As of late, the FSI is accelerating its adoption of digital technology.

Key Industry Trends

• The FSI has begun to adapt the usage of Generative Artificial intelligence to assist operations. Applications and benefits of these AI models include risk management, investment research, and time-saving.
• The impact of COVID-19 and global recession in H1 2023 has indicated the liquidity and solvency problems behind the banking sector and the FSI in general.
• The industry is experiencing significant attention to ESG products and capital allocations. The demand for sustainability investments is forcing players in the industry to revisit their allocation priorities and corporate strategy.

Recent M&A Transactions

Historical Performance

• The fed’s rate hikes coupled with challenging and unfavorable global dynamics continues to weaken the industry’s earnings. The Russia-Ukraine war, increased energy prices, and bottlenecked supply chain will continue to pose challenges to the industry for both large financial institutions and individuals.
• Mergers and Acquisitions deal-flow in the sector grew to a peak in 2021.

Future Industry Growth

• The overarching presence of artificial intelligence, machine learning, and general technological growth is both exciting and presents risk to the financial services sector in the near future.
• The Government will increase regulating the industry as the share of the retail investor market keeps growing. The Government response to the retail investor frenzy over meme stocks and cryptocurrency in 2021 is an indicator what is to come in the next couple of years for the sector.
• Several operators have highlighted cyber security as a risk to the stability of financial systems. As the finance and insurance sector increases its reliance on digital software the higher the cyber risks will be.