Welcome to the 2018 edition of our Global M&A themes: Banking & Capital Markets. This report reviews 2017 M&A activity across the banking sector, examines forward-looking confidence levels and related drivers from our latest Global Capital Confidence Barometer, and dives into the three main global markets (Americas, Europe and Asia-Pacific) to provide our outlook on the drivers of M&A in 2018.
Global banking sector M&A volumes and values fell by 16% and 34% respectively in 2017, reflecting a continued move away from megadeals. However, signs of strength were evident in mid-market M&A, as well as the payments and FinTech segments. Globally, the banking sector appears to have regained its confidence and, with improving macroeconomic indicators, is now pivoting back to a growth agenda, which will drive M&A activity. We also expect that private equity (PE) will increasingly invest globally in areas, such as banking infrastructure, consumer lending, payments and nonperforming loans (NPLs).
According to our Global Capital Confidence Barometer, dealmakers around the world are confident about the state of the global economy, with 41% intending to pursue acquisitions. We believe that a large share of transactions will be aimed at either futureproofing business models against the threat of digital disruption or gaining access to better technology and distribution capabilities. In a capital-constrained world, we expect JVs and alliances to be the preferred deal structures, while banks will also use their VC arms to gain early access to smaller high-growth businesses.
At the start of 2018, with the emergence of regulatory clarity and the completion of many banks’ noncore disposal programs, banks can shift their focus from fixing the bank of the past to building the bank of the future. As a result, in 2018, we will see an increased focus on growth targets that will help banks achieve digital maturity and scale up their core businesses.