UK & European Financial Services M&A: Sector trends H2 2021 | H1 2022 — Stock Exchanges/Trading Venues
Europe's FMI goes digital—data analytics, capital markets solutions, RegTech and DLT-based tech acquisitions feed the steady stream of M&A activity.
Overview
Current Market
- Slight dip in M&A activity, except for Europe's premiere trading venues
We Are Seeing
- Financial market infrastructure goes digital:
- Data drive through acquisitions and equity investments (e.g., Deutsche Börse's acquisition of Kneip and LSE's equity investment in Finbourne)
- Capitalising on capital markets (e.g., LSE's minority investment in Floww and Deutsche Börse's minority investment in WeMatch)
- Deployment of RegTech solutions (e.g., LSE's acquisition of Global Data Consortium)
- Increasing comfort with DLT-based technology (e.g., Euroclear's equity investment in Fnality)
- Cashing out of "liquid" stakes by:
- Banks (e.g., Sovcombank's disposal of 2.91% of SBP Exchange)
- Stock exchanges (e.g., Intercontinental Exchange's disposal of 9.85% of Euroclear)
Key Drivers/Challenges
- Stock exchanges anticipate increasing demand for:
- Sustainability data (e.g., Euroclear's equity investment in Greenomy)
- Carbon credits (e.g., Deutsche Börse's equity investment in AirCarbon Exchange)
- Stock exchanges seek:
- Scale through horizontal growth (e.g., ATHEX's acquisition of 10.24% of BELEX)
- Scope through diversification (e.g., SIX's acquisition of Ultumus)
- Scope through vertical integration (e.g., LSE's acquisition of Quantile)
- To leverage new technology to enhance service delivery (e.g., Clearstream's asset management data analytics JV with FNZ)
- "Digital era" FMI flex M&A muscle—chasing the holy grail for digital assets:
- Fully integrated digital asset exchange (e.g., Valereum's acquisition of 90% of GSX)
- Combine banking with DLT, to offer faster and more cost-effective trading services (e.g., BitMEX's acquisition of Bankhaus von der Heydt)
- Building transatlantic reach (e.g., Coinbase's acquisition of FairX)
- Private equity view FMI as technology-enhanced businesses (e.g., Silver Lake's acquisition of 9.85% of Euroclear)
Trends to Watch
- Stock exchanges compete for ESG data/data analytics providers, as demands from European banks and asset managers increase at an exponential rate
Our M&A Forecast
Europe's premier trading venues to continue inorganic growth rally, supported by colossal M&A war chests. However, as trade processing margins compress, vertical integration will become increasingly critical to secure profitability.
Data-driven growth
- London Stock Exchange (Data analytics): Acquisition of MayStreet (May 2022)
- SIX (Trade repository): Acquisition of 50% of REGIS-TR (April 2022)
- Deutsche Börse (Data analytics): Acquisition of Kneip (March 2022)
- London Stock Exchange (Investment data): (Undisclosed) equity investment in Finbourne (October 2021)
- SIX (Index and ETF data): Acquisition of Ultumus (July 2021)
Horizontal expansion
- Warsaw Stock Exchange (Stock exchange): Acquisition of 65.03% stake in Armenia Securities Exchange (May 2022)
- London Stock Exchange (Private capital marketplace): Minority equity investment into Floww (March 2022)
- Deutsche Börse (Wholesale derivatives platform): Acquisition of minority stake in WeMatch (October 2021)
- Athens Stock Exchange (Stock exchange): Acquisition of 10.24% of Belgrade Stock Exchange (August 2021)
Tech investments
- London Stock Exchange (ID verification): Acquisition of Global Data Consortium (April 2022)
- Euroclear (DLT-based payment-on-chain): Equity investment into Fnality (March 2022)
- London Stock Exchange (Trading technology): Acquisition of Tora (February 2022)
- London Stock Exchange (Efficiency optimisation): Acquisition of Quantile Group (December 2021)
Vertical partnerships
- Clearstream: Data analytics JV with FNZ (April 2022)
ESG investments
- Deutsche Börse (Carbon credit trading): Equity investment into AirCarbon Exchange (March 2022)
- Euroclear (ESG compliance): Equity investment in Greenomy (February 2022)
PE firepower
- Silver Lake: Acquisition of 9.85% of Euroclear (October 2021)
Cashing-out of "liquid" stakes
- Sovcombank: Disposal of 2.91% of SPB Exchange (October 2021)
- Intercontinental Exchange: Disposal of 9.85% of Euroclear (October 2021)
Fintechs flex muscle
- BitMEX: Acquisition of Bankhaus von der Heydt (January 2022)
- Coinbase: Acquisition of FairX (January 2022)
- Valereum Blockchain: Acquisition of 90% of Gibraltar Stock Exchange (January 2022)
- FTX: Participation in US$150 million Series C extension funding round for Chipper Cash (November 2021)
IPOs
- SPB Exchange: US$175 million SPB Exchange IPO (November 2021)
[View source.]