(2) Where is M&A activity concentrated?
Hi everyone,
Q2 2020 exit activity dropped from Q1 highs, from $85 billion in volume across 71 deals to $22 billion across 59 deals. In all, there were:
54 acquisitions, totaling $20 billion of disclosed volume
4 IPOs, totaling just shy of $2 billion
1 reverse listing (SPAC) with a placement of $200 million
Note that only 22 of 59 deals disclosed financials, so the likely amount was significantly higher (hard to speculate on how much higher, given smaller deals are overrepresented in the set that does not disclose transaction details).
More notable in Q2 was the significant uptick in deals called off from prior quarters, with many citing economic stress and coronavirus uncertainty:
Egypt delayed plans to sell its minority stake in the state-owned bank Banque du Caire (in an IPO valued at $500 million).
Mediobanca dropped its plans to acquire a 20% stake in Indonesian consumer lender BFI Finance.
The National Bank of Greece put the sale of Ethniki Insurance on hold.
AMP abandoned plans to divest its New Zealand wealth management business.
Banrisul has not yet found a buyer for its credit card business, previously valued at $432 million.
WEX threatened to renege on its planned $1.7 billion takeover offer eNett and Optal.
Commerzbank abandoned plans to sell its 69.3% majority stake in Polish bank mBank.
First Abu Dhabi Bank paused its $700 million deal to purchase Egyptian assets of Bank Audi.
Blackstone lowered its bid to take over NIBC by 25% to $1.13 billion.
Cerberus called for two seats on Commerzbank’s board to stop its “downward spiral.”
Travelex pulled its offer of sale after prospective buyers could not meet terms set by its bankers.
ED&F Man holding company is not finding sale options for its brokerage unit.
Of those 12 deals called off, 8 were either by or for banks. Banks tend to be the most conservative deal participants in a regular, healthy economy due to size and regulatory constraints. The quick and sizable decline in acquisition appetite is a cautionary note to fintechs who see a bank acquisition as a viable exit strategy in the near future.
Of the 59 deals in Q2, the majority were for private wealth managers, combining to focus on efficiency, cost reduction, and AUM growth. 9 wealth managers combined, but only SS&C and Innovest Systems disclosed the deal size ($120 million).
There were 6 payment events, including the IPOs of Shift4 (market cap: $1.66 billion) in the US and Yeahka ($2.25 billion) - the ‘Square of China’ - in Hong Kong.
There were 6 lending deals as well, with one of the most interesting Tencent’s A$390 purchase of partial Afterpay ownership, which may give the Australian buy-now-pay-later firm an easier access route to Chinese markets.
Banks, at only 3 deals, accounted for the largest outliers in deal size: Saudi’s National Commercial Bank acquired rival Samba Financial Group for $13 billion, Shinsei Bank acquired UDC Finance for $480 million, and BNP Paribas acquired Banco de Sabadell for €115 million.
As economic stress continues to impact businesses in active fintech markets like the US, it will be interesting to see whether this impact becomes specifically pronounced in fintech M&A in the next half year.
