Financial institutions M&A sector trends: brokers/corporate finance — H1 2021 and outlook for H2 2021
Financial advisers turn to M&A to deliver additional bandwidth, capability and resources to ride the post-lockdown M&A tidal wave.
Overview
CURRENT MARKET
WE ARE SEEING
- Market consolidation to increase bandwidth and capacity:
- Through acquisitions (e.g., Investec’s acquisition of minority stake in Capital mind)
- Through partnerships (e.g., Peel Hunt’s investment banking JV with Santander)
- Gravitation to online and crypto trading during COVID-19 lockdowns
- Trading tech providers bulk up:
- Financial market communications (e.g., Symphony’s acquisition of Cloud9 Technologies)
- Order management customisation (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)
- MBOs (e.g., MBO of Wren Sterling)
- Foreign investors (e.g., Xpansiv CBL’s acquisition of Project OTX)
- Trade consolidators (e.g., AJ Bell’s acquisition of Adalpha)
- Trade consolidators spend on:
- Increasing M&A bandwidth to capitalise on bull market(e.g., Banca Akro’s acquisition of Oaklins Italy)
- Expanding geographic footprints (e.g., Oanda’s acquisition of TMS Brokers)
- Diversifying income streams (e.g., AIB’s acquisition of Goodbody)
- ‘New world’ traders attract growth capital:
- >7 online trading businesses raise funding in H1 2021(e.g., BUX, Freetrade, Invstr, Parkside Securities, FundGuard, Wombat and Robinhood)
- >4 crypto trading businesses raise funding in H1 2021(e.g., Talos Trading, Bitpanda, Anchorage and Blockchain.com)
TRENDS TO WATCH
- Abandoning the ‘old ways’—increasing embrace of trading tech
- Increasing interest in ESG trading opportunities
- Regulatory intervention in crypto-trading:
- Bans on complex financial products which may pose retail consumer harm risk (e.g., UK FCA’s ban of sale of crypto-derivatives to retail consumers)
- Clamp down on crypto exchanges (e.g., UK FCA’s approach to Binance’s UK operations)
OUR M&A FORECAST
Tech-enabled brokers attempt to claw market share from traditional brokers. Robinhood’s public debut on the Nasdaq cleaves a new path to the throne (or so financial sponsors believe).
Brokers/Corporate Finance—Publicly reported deals & situations
High investor appetite
Private equity:
- BlackFin (Mortgage broking): Acquisition of Cafpi (May 2021)
- Prosus Ventures and Tencent (Online trading): Participation in US$80 million Series C funding round for BUX (April 2021)
- Left Lane Capital (Online trading): Participation in £50 million Series B funding round for Freetrade (March 2021)
- Enlight Growth Partners (Online trading): Participation in US$24 million Series A funding round for Parkside Securities (February 2021)
- Team8, Blumberg Capital and LionBird Ventures (Online investing): Participation in US$12 million Series A funding round for FundGuard (February 2021)
- Fuel Ventures (Online trading): Participation in £2 million Seed funding round for Wombat (February 2021)
- Ribbit Capital (Online trading): Participation in US$2.4 billion late-stage funding round for Robinhood (February 2021)
Foreign investors:
- Xpansiv CBL (ESG commodity marketplace): Acquisition of Project OTX (March 2021)
Trade 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)
- Credit Bank of Moscow (Russia): Acquisition of Region Investments (March 2021)
- Banque Misr (US): Acquisition of 90% of CI Capital (March 2021)
- AIB Group (Ireland): Acquisition of Goodbody Stockbrokers (March 2021)
Market appetite:
- Robinhood (Online trading): Nasdaq IPO (March 2021)
Market consolidation to increase bandwidth and capacity
UK bankers are set for a bumper deal-making year after a frenetic start to 2021 sent the value of M&A to its highest level in 2 decades. Financial News (February 2021)
Acquisitions:
- Investec (Financial advisory): Acquisition of minority stake in Capitalmind (May 2021)
- MNC Kapital Indonesia (Brokerage): Acquisition of majority stake in Auerbach Grayson & Company (January 2021)
Partnerships:
- Peel Hunt (Investment banking): Investment banking JV with Santander (April 2021)
Gravitation to online and crypto trading during lockdowns
Fundraisings—traditional asset classes:
- BUX (Online trading): Successful US$80 million Series C funding round, led by Prosus Ventures and Tencent (April 2021)
- Freetrade (Online trading): Successful £50 million Series B funding round, led by Left Lane Capital (March 2021)
- Invstr (Online trading): Successful US$20 million Series A funding round, led by Ventura Capital (March 2021)
- Parkside Securities (Online trading): Successful US$24 million Series A funding round, led by Enlight Growth Partners (February 2021)
- FundGuard (Online trading): Successful US$12 million Series A funding round, led by Team8, Blumberg Capital and LionBird Ventures (February 2021)
- Wombat (Online trading): Successful £2 million Seed funding round, led by Fuel Ventures (February 2021)
- Robinhood (Online trading): Successful US$2.4 billion late-stage funding 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)
Fundraisings—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$170 million Series B funding round, led by Valar Ventures and DST Global (March 2021)
- Bitpanda (Crypto trading): Successful €10 million Series B extension round from Valar Ventures and DST Global (May 2021)
- Anchorage (Crypto trading): Successful US$80 million Series C funding round, led by GIC (February 2021)
- Blockchain.com (Crypto trading): Successful US$120 million Series C funding round, led by Google Ventures (February 2021)
Abandoning the ‘old ways’
- Symphony (Trading tech): Acquisition of Cloud9 Technologies (June 2021)
- ION (Trading tech): Acquisition of Dash Financial Technologies (February 2021)
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