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Clifford Chance

Clifford Chance

Insurance Insights

FIG M&A Activity sees global slow-down after record highs

2021 was a record-breaking year for financial institutions M&A with deal volume and values across the banking, insurance and asset management sectors reaching new highs. At the outset of the year 2022 was predicted to see a continuation of this high level of activity, but with a backdrop of geopolitical instability following Russia's invasion of Ukraine and a deteriorating macroeconomic environment with high inflation and increasing interest rates, M&A activity has in fact seen a broad-based decline in the first half of 2022. However, whilst activity has fallen from the extraordinary highs of 2021 each of the banking, insurance and asset management sectors have nonetheless seen notable transactions.

Asset Management

As reported by Financial News, the first quarter of 2022 saw a 49% jump compared with the first quarter of last year with the value of deals totalling $18bn globally, the highest since 2018.1 This strong start was reflected in the UK market which saw M&A worth $4.5bn, the best start to the year since 2017.2 So far in 2022, the biggest asset management deal globally and indeed any FIG deal in the UK has been RBC's £1.6bn purchase of Brewin Dolphin which fell just outside the top 10 of the largest financial institutions deals globally for 2022 to date.3

In recent years, M&A activity in the asset management segment has focused on consolidation as players have sought to increase scale in a competitive industry with growing costs pressures. Some industry commentators believe that following this recent consolidation the market now contains too many mid-sized players and that these businesses are themselves likely to become a source of activity in the coming years, with only a select few having sufficient financial clout to continue scaling up. Elsewhere high performing units could be spun-out from the 'squeezed middle' to operate as more nimble boutique independents.4


The banking sector has continued to see high profile M&A activity in 2022, particularly in the Asia-Pacific region. The year's largest deal to date has been the £46bn mega-merger of India's largest private sector bank, HDFC Bank, and largest mortgage lender, Housing Development Finance Corporation. Other notable transactions in the region include Citibank's disposals of its consumer banking businesses in India to Axis Bank, in Taiwan to DBS and in Indonesia, Malaysia, Vietnam and Thailand to UOB. Interestingly, each transaction represents a transfer of the business to a homegrown or regional player, reflecting a pull-back by western financial institutions from their late 1990s and early 2000s international expansion.

Rationalisation has been a recuring theme across recent transactions in the banking sector, with larger banking groups looking to divest non-core business lines. This trend can also be seen in the Americas region with Texas Capital Bancshares Inc. disposing BankDirect Capital Finance, its insurance premium finance unit, as part of its strategy to simplify its business model and redeploy capital to core business areas. EMEA has seen limited banking M&A in 2022, reflecting the region's increased geopolitical instability, but Credit Suisse's recently announced disposal of its global trusts business is consistent with the re-evaluation of non-core businesses seen in other regions.

Whilst some banking groups have used M&A in 2022 to slim down operations, others have taken the opportunity to add capabilities and strengthen their offerings.

In June, Barclays announced its acquisition of mortgage originator Kensington Mortgage Company (KMC), a specialist lender of loans to the self-employed or those with complex or irregular incomes. KMC has previously not held the mortgages it originated on its own balance sheet. However, in tandem with acquisition of KMC, Barclays has also acquired a £1.2bn mortgage portfolio consisting of KMC originated loans and going forward KMC will keep new loans on its balance sheet. This suggests that Barclays are keen to capture the higher interest income these loans will provide. Other banks might seek similar deals to provide them exposure to the increasing income from traditional lending activities as a result of rising interest rates.

Separately, the first half of 2022 has seen Goldman Sachs agree to acquire NextCapital Group, a digital retirement advice business that partners with US based financial institutions. We have also seen Lloyds Bank complete their acquisition of the Embark Group which provides white-labelled investment management platforms for corporates and financial advisors. Both transactions suggest that banks see providing services to the investment management sector as an opportunity to capture revenues associated with the growing industry.


The insurance sector has also presented a mixed picture in terms of M&A activity in 2022. While there have been headline deals in the US such as Berkshire Hathaway's $12bn acquisition of the Alleghany Corporation, according to Deloitte the first half of 2022 has seen as much as a 30% fall in deal volumes.5 The increase to interest rates has driven up the cost of raising finance for potential PE buyers and consequently there appear to be mismatches in sellers' price expectations and what bidders can offer without impacting their expected rates of return. Notwithstanding these challenges there has been continued activity in the insurance intermediaries segment which has become popular for PE buyers. The simpler regulatory framework and capital requirements of intermediaries can make them easier targets than full insurance carriers. Cinven's recent acquisition of Swedish insurance broker Säkra provides an example of this kind of M&A activity.

Interestingly, the Säkra transaction was executed through Cinven's inaugural Strategic Financials Fund which held its final close in July of this year and has total commitments of €1.5bn. The fund is to focus on areas such as life and non-life insurance and reinsurance, asset-backed specialty finance, wealth management, insurance distributors and other capital light, tech-enabled financial service providers. Also active in the insurance segment is the Carlyle Group which has now raised three funds to focus on the financial services sector.

Looking forwards

After a frantic 2021, a cooling off in 2022 was perhaps to be expected for financial institutions M&A, although the more challenging business environment has undoubtedly accelerated this slow down. Companies have instead been focusing on shoring up their balance sheets in preparation for an uncertain economic period. However, there are signs that M&A will return with the asset management and insurance sectors the most likely sources of activity. The emergence within some of the largest private equity funds of speciality financial services funds with substantial dry powder ready to be deployed indicates that interest in the financial services sector remains high. In addition, the continued devaluation of sterling versus foreign currencies alongside proposed cuts to UK corporation tax may make UK targets more attractive propositions for overseas buyers. Whether these factors mean that M&A activity returns in the coming months or longer, remains to be seen.

1. Fund manager M&A frenzy spills into first quarter as global deals reach $18bn
2. Fund manager M&A frenzy spills into first quarter as global deals reach $18bn 
3. Mergermarket Data
4. Veteran dealmaker warns of industry ‘shakeout’ after M&A frenzy
5. 2022 insurance M&A midyear update: Rapid shifts and continued uncertainties 

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