Mergers and acquisitions  

Financial services M&A is seeing 'busiest start to year since 1980'

Financial services M&A is seeing 'busiest start to year since 1980'

The mergers and acquisitions market across financial services will continue to boom despite prices across the industry being at an all-time high, according to M&A specialist Morrison & Foerster.

Speaking to FTAdviser, the lawyers said it was “natural” to expect prices to balloon where there is business and that currently the market was seeing its busiest start to the year since 1980.

There have been increasing numbers of deals across the advice sector, platforms and asset managers in recent months and some have predicted 2021 could be a year for advice deals as new deals and postponed deals both enter the market.

Stuart Alford, partner at Morrison & Foerster, said: “Firms probably haven't been prepared to perhaps overpay a bit in this market at the moment but there is a lot of powder available and depending on the particular investor pressure to deploy capital - when you add the two things together it can result in top valuations. 

"We’re told that global M&A has seen the busiest start to the year since 1980, and it’s fair to say that valuations are high in sectors less impacted by the pandemic.”

He added: “2021 is going to be a very busy year. I think that the question sort of looking out into the longer term is more difficult, but I wouldn't see any immediate change.”

Simon Arlington, partner at Morrison & Foerster, agreed.

He said: “There's nowhere else for people to be. You’re gonna get the asset bubbles for so long as there isn't anything better. Obviously with the creeping up of inflation, things can change but I don’t think we’ll see it for some time.”

Private equity boom

In recent months, the industry has also seen a large increase in the number of private equity firms entering the space when it comes to M&A deals.

In March, Parmenion became the latest platform to be bought by a private equity house.

In December last year, private equity firm Anacap bought Novia after having bought Wealthtime earlier that year.

James Hay was bought by private equity firm Epiris in 2019 and it has since gone on to buy Nucleus, in a deal announced earlier this year, creating an entity with assets of £45bn.

Alford said: “There's been a theme towards that for a number of years, particularly from several years ago, coming out of Brexit and the fact that some of the UK assets [went] to foreign investors.

“One of the things that you see, particularly in international law firms if you work with international clients, is that there's been a lot of deal activity [...] [which] perhaps may not have been just purely domestically as a result of that.

“The other thing it tells you is that UK assets are viewed favourably by international investors.

“There has been positivity there and investment in the UK and therefore the Brexit story is not getting as negative as it might otherwise be if you look at it through that lens.”