M&A financial institutions: Brokers/Corporate Finance | White & Case srl

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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.

Overview

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 (e.g. 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 year of bumper 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): Successful £2m funding round, led by Fuel Ventures (February 2021)
  • 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)

Click here to download ‘Financial Services Mergers and Acquisitions Reach Dizzying Heights as COVID-19 Travel Lockdowns and Bans End’ PDF

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