Deal-making among European financial services companies slowed in the first three months of 2022, a quarter that was marked by Russia's invasion of Ukraine and rising inflation.
Companies made 246 deals from January to March, declining from the 278 reached in the year-ago period, according to S&P Global Market Intelligence data. The figure is the lowest quarterly volume since the third quarter of 2020.
In March, as the war continued, 80 deals were reached, down from 103 a year ago. The figure was higher than the 60 deals signed in February, but below the 106 reached in January.
The conflict has led some companies that had been planning mergers to delay their plans or conduct additional due diligence to identify legal or financial risks, The Wall Street Journal reported April 1, citing M&A executives. The possibility of higher interest rates in response to rising inflation is also a factor since low rates were a key driver for the record level of global deal-making in 2021.
These factors are poised to hurt global investment banking activities in the first half and possibly beyond. Between Jan. 1 and mid-March, M&A, debt and equity capital market transaction volumes dropped to their lowest levels in five years, Market Intelligence previously reported.
Top deals in March
Some significant deals were reached in March, the highest in terms of value being Royal Bank of Canada's acquisition of U.K.-based asset manager Brewin Dolphin Holdings PLC. The deal, announced March 31, is valued at over €1.84 billion. London Stock Exchange Group PLC also announced the sale of its BETA+ assets in a €994 million deal.
Several big transactions were also made in the insurance sector, among them Brown & Brown Inc.'s €1.79 billion takeover of U.K.-based Global Risk Partners Ltd. There were 27 deals in the insurance sector in March, the highest number of any financial services vertical. Globally, transaction activity in the insurance sector declined in the first quarter.
In the pipeline
The U.K. remained the most active country in terms of transactions, with 27 in March. More deals are likely to come. NatWest Group PLC is reportedly interested in buying wealth manager Tilney Smith & Williamson Ltd. London Stock Exchange Group said recently that it will acquire U.S.-based identity verification data company Global Data Consortium Inc. for an undisclosed sum.
But buyers will need to contend with challenging approval processes.
The U.K. not only faces macro-economic constraints for M&A but also "institutional [failures]," said Olly Laughton-Scott, founding partner of U.K.-based IMAS, a financial advisory services firm focused on M&A.
"In the past, we have had applications approved in less than three weeks. We are now seeing our deals waiting over three months," Laughton-Scott said in the company's M&A review for March released April 8.