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The UK financial services industry has seen significant mergers and acquisition (M&A) activity in 2024, despite a challenging wider macroeconomic climate featuring higher interest rates, regulatory scrutiny and political uncertainties. The first half of 2024 saw a 66% increase in the value of M&A deals compared to the same period in 2023, with 220 financial services deals completing across the UK in H1 2024, demonstrating the industry’s attractiveness.

Recent activity shows that acquirers are increasingly focusing on strategic transactions, driven by a desire to accelerate growth and expand current service capabilities, particularly in areas such as technology and digital transformation. This presents an interesting opportunity for businesses operating in the mid-market, which typically offer the specialised, innovative products and services that are in high demand as acquirers seek to expand and evolve.

Private equity investors, armed with significant capital to invest, continue to see sectors such as wealth management, insurance and FinTech as attractive opportunities characterised by resilient end markets and the potential to scale through consolidation and operational improvements. With many larger players and consolidators in the space being private equity backed themselves, appetite to grow through acquisitions is expected to continue. 

Key considerations that enhance the value of your financial services business

The financial services market is broad and while strategic buyers and investors will look for different features, there are common themes that enhance the value of a business in this space:

Differentiation

Differentiating your product or service ensures you stand out and creates embedded customer demand. Whether this is through a niche offering, exclusive relationships, the customer journey or use of technology, standing out from your competition and having a market specialism helps to make your business a unique investment opportunity. Knowing your market and clearly articulating your position – identifying your selling propositions and proactively developing them – will help you stay ahead, giving buyers and investors comfort over the long-term sustainability of your performance.

Scalability

Strategic buyers and investors are increasingly focused on acquiring technological capabilities to streamline operations, improve customer experiences, and digitise operations that improve efficiencies. This could be a market-leading platform, proven processes or valuable IP that can be leveraged to grow your business in a way that doesn’t inflate your cost base. Businesses that have know-how or technology that can be ‘rolled out’ to new markets or verticals reduces the perceived risk in your growth plan and adds to the price a buyer or investor is prepared to pay. 

Your ESG story

Demonstrating a compelling ESG story enhances your equity narrative, driven by a combination of stricter reporting requirements, stakeholder and customer pressure and a growing realisation that organisations with embedded sustainability practices are more resilient and more appealing to new markets and blue-chip supply chains. This may involve bolstering your ESG portfolio offering, integrating ESG opportunities into your financial modelling, re-organising operations to improve long-term sustainability or better monitoring of the policies you already have. Each of these aspects can add to the value of your company. 

Managing dependencies

Every business has dependencies, whether it’s on underwriting capacity or key advisers. Identifying these risks and finding substitutes or alternatives can give buyers confidence in the sustainability of your business now, and in the future. It’s important to show that your business can thrive even if key individuals or resources are no longer available.

Package your data

A key attraction with financial services businesses is their access to data and the insights that it provides. Data is therefore a major asset and should not be overlooked. Buyers and investors increasingly expect to witness the trends in a business, to evidence the growth story and build confidence in their investment decision. Many businesses don’t use their data to its full potential, and this could translate to lost value later, or a failure to communicate your sales messages effectively. Preparing and packaging your data is now a core part of getting ready for a transaction.

How our deal services team can help support your financial services business

Considered planning and strategic positioning are essential to maximise the value, mitigate the risk of disruption to your business or value erosion and ensure the long-term success of the transaction.

We have advised on 39 transactions in the financial services industry in 2023. As a full-service firm, we guide clients through the entire sale, fundraising or acquisition lifecycle – helping them prepare the necessary information and maximise value throughout the process.

For more information on how we can help you enhance and protect value, please see our guide.

If you would like to discuss your options, please get in touch with Angela Toner or Natalie Ord.