Financial institutions M&A sector trends: brokers/corporate finance — H1 2021 and outlook for H2 2021
Financial advisors are turning to M&A to provide additional bandwidth, capacity and resources to ride the post-lockdown M&A tidal wave.
Insight
CURRENT MARKET
WE SEE
- Market consolidation to increase bandwidth and capacity:
- Through acquisitions (e.g. Investec’s acquisition of a minority stake in Capital mind)
- Through partnerships (e.g. Peel Hunt’s investment banking JV with Santander)
- Gravitation towards online and crypto trading during COVID-19 lockdowns
- Trading technology providers group together:
- Financial market communications (e.g. Symphony’s acquisition of Cloud9 Technologies)
- Customization of order management (e.g. ION’s acquisition of Dash Financial Technologies)
KEY DRIVERS/CHALLENGES
- High Investor Appetite Drives M&A Activity:
- Venture capital (e.g. Fuel Ventures’ investment in Wombat)
- MBO (e.g. Wren Sterling MBO)
- Foreign investors (e.g. acquisition of the OTX project by Xpansiv CBL)
- Commercial consolidators (e.g. Adalpha acquisition by AJ Bell)
- Commercial consolidators spend on:
- Increased M&A bandwidth to take advantage of the bull market (e.g. the acquisition of Oaklins Italy by Banca Akro)
- Expand geographic footprints (e.g. Oanda’s acquisition of TMS Brokers)
- Diversification of revenue streams (e.g. acquisition of Goodbody by AIB)
- “New World” traders attract growth capital:
- >7 online trading companies raise funds in the first half of 2021 (e.g. BUX, Freetrade, Invstr, Parkside Securities, FundGuard, Wombat and Robinhood)
- > 4 crypto trading companies raise funds in the first half of 2021 (eg Talos Trading, Bitpanda, Anchorage and Blockchain.com)
TRENDS TO WATCH
- Ditch the “old ways” – increasingly embrace trading technology
- Growing interest in ESG trading opportunities
- Regulatory intervention in crypto-trading:
- Bans on complex financial products that may pose a risk of harm to retail consumers (e.g. UK FCA ban on selling crypto-derivatives to retail consumers)
- Crack down on crypto exchanges (e.g. the UK FCA’s approach to Binance operations in the UK)
OUR M&A FORECAST
Tech-savvy brokers are trying to grab market share from traditional brokers. Robinhood’s public debut on the Nasdaq opens a new path to the throne (or so the financial backers believe).
Brokers/Corporate Finance – Publicly reported transactions and situations
Strong investor appetite
Capital investment :
- BlackFin (mortgage brokerage): Acquisition of Cafpi (May 2021)
- Prosus Ventures and Tencent (e-commerce): Participated in a US$80m Series C funding round for BUX (April 2021)
- Left Lane Capital (e-commerce): Participated in a £50m Series B funding round for Freetrade (March 2021)
- Enlight Growth Partners (e-commerce): Participated in US$24 million Series A funding round for Parkside Securities (February 2021)
- Team8, Blumberg Capital and LionBird Ventures (Online Investing): Participated in a US$12 million Series A funding round for FundGuard (February 2021)
- Fuel Ventures (e-commerce): Participated in a £2m seed funding round for Wombat (February 2021)
- Ribbit Capital (online trading): Participated in a $2.4 billion USD financing round for Robinhood (February 2021)
Foreign investors:
- Xpansiv CBL (ESG commodities market): Acquisition of Project OTX (March 2021)
Commercial Consolidators:
- Flexpoint Ford (UK): Acquisition of AFH Financial Group (June 2021)
- Banca Akros (Italy): Acquisition of Oaklins Italy (May 2021)
- Institutional Shareholder Services (Sweden): Acquisition of Nordic Investor Services (April 2021)
- AJ Bell (UK): Acquisition of Adalpha (March 2021)
- Oanda (Poland): Acquisition of TMS Brokers (March 2021)
- Moscow Credit Bank (Russia): Acquisition of Region Investments (March 2021)
- Bank Misr (USA): Acquisition of 90% of CI Capital (March 2021)
- AIB Group (Ireland): Acquisition of Goodbody Stockbrokers (March 2021)
Market appetite:
- Robinhood (e-commerce): Nasdaq IPO (March 2021)
Market consolidation to increase bandwidth and capacity
UK bankers are set for a bumper year of deals after a frenetic start to 2021 that saw the value of mergers and acquisitions soar to its highest level in 2 decades. Financial news (February 2021)
Purchases:
- Investec (Financial advice): Acquisition of a minority stake in Capitalmind (May 2021)
- MNC Kapital Indonesia (Brokerage): Acquisition of majority stake in Auerbach Grayson & Company (January 2021)
Partnerships:
- Peel Hunt (Investment Bank): Investment banking JV with Santander (April 2021)
Gravitation towards e-commerce and crypto during shutdowns
Fundraising – traditional asset classes:
- BUX (e-commerce): Successful US$80 million Series C funding round, led by Prosus Ventures and Tencent (April 2021)
- Freetrade (online trading): Successful £50m Series B funding round, led by Left Lane Capital (March 2021)
- Invstr (e-commerce): Successful US$20 million Series A funding round, led by Ventura Capital (March 2021)
- Parkside Securities (e-commerce): US$24 million Series A funding round, led by Enlight Growth Partners (February 2021)
- FundGuard (e-commerce): Successful US$12 million Series A funding round, led by Team8, Blumberg Capital and LionBird Ventures (February 2021)
- Wombat (online trade):
- Robinhood (e-commerce): Successful US$2.4 billion financing round, led by Ribbit Capital (February 2021)
- HQLAx (securities lending): Successful €14.4 million Series B funding round, led by BNY Mellon, Goldman Sachs, BNP Paribas and Citigroup (January 2021)
Fundraising – digital asset classes:
- Talos Trading (crypto trading): Successful US$40 million Series A funding round, led by Andreessen Horowitz (May 2021)
- Bitpanda (crypto trading): Successful US$170m Series B funding round, led by Valar Ventures and DST Global (March 2021)
- Bitpanda (crypto trading): Successful €10m Series B expansion round from Valar Ventures and DST Global (May 2021)
- Anchorage (crypto trading): $80M Series C Funding Round, Led by GIC (February 2021)
- Blockchain.com (crypto trading): Successful US$120m Series C funding round, led by Google Ventures (February 2021)
Abandon the “old ways”
- Symphony (Commercial Technology): Acquisition of Cloud9 Technologies (June 2021)
- ION (Commercial Technology): Acquisition of Dash Financial Technologies (February 2021)
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