Bank M&A across Europe comes to a boil—the COVID-19 pandemic has hastened the confluence of conducive conditions for mega domestic mergers. Spain and the Balkans lead the charge, with Italy, Germany, France, Poland and the UK expected to follow. The pandemic has hastened the confluence of conducive conditions for bank mergers. H2 2020 has borne witness to the rise of domestic champions in Spain, Hungary, Serbia and Slovenia. It is now a question of when, not if, larger regional banks will vie for the pan-European crown. Patrick Sarch, Partner, London, Co-head of Financial Institutions Global Industry Group Overview
3 key drivers of bank M&A in H2 2020: Bank consolidation across Europe: COVID-19 turbocharges deal-making among regional and domestic banks
Strategic M&A: COVID-19 cultivates an opportunistic M&A greenhouse
Attempted digital coup d’état: ‘Challengers’ redouble disruptive efforts in the wake of physical branch closures
CURRENT MARKET
Coming to a boil
WE ARE SEEING
Immediate relief from COVID-19 stress: Corporate reorganisations delivering cost reduction and overcapacity elimination (e.g., merger between LBBW Asset Management/LBBW Wealth Management merger and Société Générale/Credit du Nord merger)
Rescue equity capital injections (e.g., Deutsche Bank’s £276 million equity capital injection into Deutsche Bank India)
Rescue debt injections (e.g., Afreximbank’s US$200 million lifeline loan to Zenith Bank)
Consolidation activity heats up across Europe: > 35 regional bank consolidation deals in H2 2020 Domestic champions emerge amidst COVID-19 uncertainty—Spain (CaixaBank/Bankia merger), Hungary (MKB Bank/Budapest Bank/ Takarékszövetkezeti merger), Serbia (Nova Ljubljanska banka’s acquisition of Komercijalna) and Slovenia (Nova Kreditna Banka Maribor/Abanka merger) Banks re-visit core vs. non-core asset allocations: Operating businesses—> 30 non-core operating business disposals in H2 2020 Financial assets—French banks join Italian, Spanish, Greek and Cypriot comrades in relation to disposal of soured exposures in H2 2020 The COVID-19 pandemic cultivates an opportunistic M&A greenhouse: Availability of high-quality assets (e.g., Nordea’s acquisition of SG Finans) Availability of distressed assets (e.g., Santander’s acquisition of Wirecard’s European business) Tapping into alternative product distribution channels (e.g., Metro Bank’s acquisition of RateSetter) Growing positive sentiment in relation to partnerships (e.g., ABN AMRO’s equity brokerage JV with ODDO BHF) ‘Challengers’ redouble disruptive efforts in the wake of physical branch closures: Successful capital raisings by digital lenders (Monzo, Lunar, Chime, neon, Griffin, Aidexa, Vivid Money, Lili, Greenwood, Hammock, Bnext and Memo, to name just a few, have successfully raised growth capital in H2 2020) New entrants targeting underserviced market segments (i.e., Monument and Pennyworth, targeting […]
