Financial Services Industry

Q3 2022: 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.
• As the COVID-19 pandemic subsides and economies around the world are challenged with increased interest rates and inflation, the FSI continues to monitor federal reserve policies, the war in Ukraine, and geopolitical stability in the Middle East for appropriate strategy response.

Key Industry Trends

• Special purpose acquisition companies grew by 5.2% from $154 billion in 2021.
• The Consumer Financial Protection Bureau is in process of reviewing fees charges by financial service companies amid the crackdown on hidden costs and junk fees.
• The banking sector remains healthy with a strong balance sheet, improved capital buffers, and liquidity despite declining earnings.
• 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

• As of August 2022, the FSI in the United States employed over 6.6 million people and exported $114.5 billion in financial services and insurance.
• 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.
• The Financial Services Industry revenue increased 1.5% annually to $4.9 trillion over the past five years.

Future Industry Growth

• Financial Services Industry M&A transactions value have declined by 25% in Q3’ 2022 compared to Q3 2021 $614.4 billion. Deal volume also declined by 9% totaling 5,360 deal counts in the quarter.
• By 2027, the economy is expected to recover from the COVID-19 pandemic, and the revenue for the FSI is anticipated to increase 1.5% annually to $5,265.3 billion.
• Disposable income levels and corporate profit is anticipated to increase over the next five year, improving businesses and consumers’ living standards while mitigating credit risk.