Following the momentum achieved in Q3 2023, companies moved forward with a new set of mergers and acquisitions in Q4 2023 in an effort to consolidate their positions and expand their service portfolios, particularly in the context of ever-increasing competition in the field. Q4 also saw the finalisation of several acquisition processes that started in Q3, both in the cybersecurity sector and the banking sector, with Thales and Deutsche Bank leading the charge.
In essence, the fourth quarter of 2023 witnessed a wide selection of mergers and acquisitions within the financial industry, signalling a dynamic landscape undergoing significant transformation. Against the backdrop of evolving consumer preferences, technological advancements, and regulatory changes, financial institutions across different sectors embarked on strategic initiatives to realign their operations, enhance market positioning, and capitalise on emerging opportunities.
From traditional banking institutions restructuring to fintech firms leveraging acquisitions for expansion, the industry exhibited a multifaceted response to the forces reshaping its landscape. Moreover, the integration of cutting-edge technologies such as artificial intelligence and a heightened focus on cybersecurity underscored the industry's commitment to innovation, resilience, and adapting to the demands of the digital era.
However, it’s worth noting that, overall, the fintech sector has experienced a decline in deal activity, reflecting a global trend of companies exercising caution regarding mergers and acquisitions. Data from the first half of 2023 indicated a notable decrease, with only 128 M&A deals recorded, in contrast to 248 and 188 deals during the corresponding periods in 2022.
Some banks decided to adopt a mobile approach in Q4 2023 by selling their wealth portfolios or mortgage portfolios to other entities. As part of these restructuring efforts, Metro Bank started a series of negotiations with Barclays to offload a USD 3.7 billion mortgage portfolio.
To be specific, Metro Bank went on this path in a bid to improve its overall financial stability, as the exclusive talks with Barclays revolved around the potential sale of Metro Bank's residential mortgage book.
On the other hand, Citi agreed to sell its onshore consumer wealth portfolio to HSBC Bank China as part of a broader global strategy shake-up. The transaction covered the total of deposits and investment AUMs of approximately USD 3,6 billion. The deal is expected to close in the first half of 2024, and the terms and conditions of the transactions were not disclosed by the enterprises.
In December, ABN AMRO revealed its intention to acquire BUX in an effort to solidify its position in the retail investment sector.
The acquisition of BUX could potentially allow ABN AMRO to improve its digital offering while securing and improving its presence in the retail investment market. The bank’s decision was influenced by BUX’s presence in Europe, with operations spanning across eight markets.
In Q4 2023, Deutsche Bank advanced its efforts to acquire Numis in a bid to solidify its engagement with corporates across the UK. This strategic move was in sync with Deutsche Bank's Global Hausbank strategy, positioning it as the primary point of contact for clients in the financial services sector. The merger resulted in the entity named Deutsche Numis, which aims to facilitate deeper engagement with corporate entities throughout the UK.
UniCredit and Alpha Services and Holdings have announced a merger in Romania and a partnership in Greece. The agreement outlined the merger of UniCredit Bank with Alpha Bank Romania, which is anticipated to result in the formation of the third largest bank in the local market, accounting for a combined 12% market share by total assets. Both UniCredit Romania and Alpha Bank Romania have established presences in the corporate and retail segments, making their merger complementary in the country.
Upon completion, Alpha Bank is projected to retain a 9.9% share capital in the combined entity and receive a cash consideration of USD 325 million.
In the fintech segment, following up on its plans to expand its capacity to support large clients with complex after-sale demands, Fiserv acquired Skytef and improved its network of partners in Brazil. The acquisition allowed the two companies to focus on helping partners and distributors increase their revenue with additional products and services, such as instant payments (PIX), omnichannel payment ecosystems (Carat), acquiring and issuing processing, along with access to training and qualified staff from Fiserv.
Mergers and acquisitions in the cryptocurrency sector in Q4 2023 were driven by a need for expansion and consolidation, but also compliance with regulatory efforts such as the Markets in Crypto-Assets (MiCA). The cryptocurrency industry has been through a rough patch ever since the notorious collapse of FTX in November 2022. However, in 2023, the industry has slowly gained some ground and companies are looking forward to a brighter future despite a series of breaches and hacks that hampered progress and eroded trust in entities such as Euler Finance and Poloniex, among others.
In a bid to solidify its presence in Europe, US-based digital asset exchange Kraken has agreed to acquire the Netherlands-based crypto broker BCM. This proposed acquisition aimed to improve Kraken's position in the Dutch market, extending the benefits of Kraken's product portfolio, liquidity, robust security standards, and round-the-clock client support to BCM's customers.
Kraken's decision to accelerate its European growth coincides with the European Commission's introduction of MiCA, which facilitates industry investments in the European region, promoting competitive products and services for consumers.
In Brazil, investment bank BTG Pactual agreed to purchase 100% of crypto-friendly brokerage Orama’s shares for USD 98.7 million. The move came in the context of BTG Pactual's broader strategy to expand its digital banking services, and it aims to provide better investment options to its clientele. At the time, official representatives from BTG expressed enthusiasm about the acquisition and emphasised that it would grant Orama customers access to BTG's comprehensive platform.
Businesses increasingly leverage digital technologies to improve profitability and operational efficiency, and current advancements in artificial intelligence can provide several benefits for these entities, including optimised operations, better security, and improved data analysis. The integration of AI in the fintech sector has seen widespread adoption and is projected to become essential for financial enterprises in the next years.
Thanks to ongoing advancements in artificial intelligence, there are continuous efforts to integrate it into various aspects of fintech. In this ever-evolving and financially oriented sector, AI can help improve customer experience, manage risk, prevent fraud, help with market expansion, automate operations, ensure regulatory compliance, and improve the overall security of operations.
Following this thread, several companies, particularly those operating in the cybersecurity sector, have embraced artificial intelligence and plan to contribute to its development in the future. When it comes to M&As, financial service providers are willing to invest and acquire companies that are proficient in AI, as they acknowledge the game-changing benefits this technology can bring.
In the US, a study conducted by Trustpair revealed that payment fraud attempts on US businesses grew by 71% in 2023. The study also mentioned that 96% of all US-based businesses were targeted by at least one fraud attempt in 2023, while 90% of these companies fell victim to at least one successful fraud attack.
Financial institutions are constantly being targeted by malicious actors in attempts to identify and take advantage of system vulnerabilities. In this context, solutions that can prevent fraud and money laundering, and protect from cyberattacks are becoming increasingly more sought-after, particularly as more institutions are ramping up their digitalisation efforts.
Speaking of digital transformation, IBM announced that it has entered into a definitive agreement to purchase StreamSets and webMethods from Software AG for USD 2.3 billion. StreamSets and webMethods specialise in application integration, API management, and data integration, addressing the growing demand for such solutions as organisations move towards digitalisation.
Moreover, global identity and secure digital services provider IN Groupe worked with Nexi to acquire its eID business. Nexi developed identity and trust solutions in Denmark in a bid to contribute to the digitisation of Nordic societies. By combining Nexi’s eID and IN Groupe’s capabilities, the company aimed to improve its ability to support customers across Europe in the context of new regulations, including eIDASv2 and NIS2.
In Canada, as a response to the rising threat to hybrid workforces by cybercriminals, KPMG acquired IMagosoft to help clients manage their data and prevent unauthorised access to their networks. KPMG also brought up the growing importance of Identity and Access Management (IAM) for Canadian organisations, as well as the importance of finding the right balance between security, operational efficiency, and user experience, which remains a challenge for some organisations.
Perhaps one of the most noteworthy M&A events in the cybersecurity sector was Thales’ acquisition of Imperva, which started in Q3 2023 and was finalised in Q4. In December, the France-based technology company announced that it completed the acquisition.
Alongside Imperva, Thales aims to assist customers in addressing cybersecurity challenges that have rapidly grown in frequency, severity, and complexity, with comprehensive solutions for an extensive range of application, data security, and identity use cases. Combined, these three market segments are forecasted to increase significantly in the years to come, with analysts projecting worldwide end-user spending to total approximately USD 20 billion in 2024.
Following Imperva’s addition, Thales’ expanded cybersecurity portfolio can provide a complementary combination of solutions to help customers secure applications, data, and identities across their entire digital ecosystem.
In the payments sector, the flow of mergers and acquisitions was partly fuelled by a desire to increase the adoption of secure digital payments, but also by the need to tap into new markets and audiences and expand into different regions. Moreover, in the ecommerce field, prominent Eastern presences such as Shein purchased smaller fashion brands in a bid to solidify their footholds in the Western market while also revitalising the acquired companies via exposure and global growth support.
In essence, as businesses expanded their product suites through acquisitions, they gained the ability to serve more clients and increase their revenue while also cementing their presence in certain markets. M&As also proved crucial for certain businesses to keep up with or surpass their rivals.
Omnicom’s acquisition of Flywheel Digital for USD 835 million immediately stands out. The company took the leap to increase its overall reach and expand into the digital commerce and retail media sectors. Flywheel was an obvious choice for Omnicom due to its ability to offer capabilities in retail commerce operations, media execution, as well as market intelligence. The services are offered through the company’s Flywheel Commerce Cloud technology platform, which was developed to deliver near real-time insights for the optimisation decision-making processes.
Following this acquisition, the Flywheel Commerce Cloud platform incorporated products and transaction data into Omnicom’s audience and behavioural data to deliver optimised insights and analytics to users.
The global retail industry continues to see strong demand for payments and POS systems. In this context, Nayax agreed to acquire Retail Pro International in a move valued at USD 36.5 million on a cash-free, debt-free basis. The acquisition represented a strategic move to tap into the growing demand for retail POS solutions, leveraging the experience and reach of Retail Pro. Moreover, the move added various revenue sources, including professional services, subscriptions, and processing revenue, to Nayax's financial profile.
In the ecommerce sector, Shein purchased the Missguided fashion brand name from Frasers Group in October in an effort to expand its presence in the Western market. Missguided was founded in 2009 and grew to become one of the UK's biggest online fashion businesses, focusing on younger women. However, after facing supply chain issues, rising freight costs, and increasing competition from rivals, the company fell into administration in May 2022 before being purchased.
Shein’s executives revealed their aim to reignite the Missguided brand and support its global growth through Shein's on-demand production model, ecommerce expertise, and global reach.
Lastly, payment processor Shift4 finalised the acquisition of SpotOn’s sports and entertainment business unit for a sum of USD 100 million in cash. With this transaction, Shift4 gained access to SpotOn’s existing roster of sports and entertainment clients, along with a portion of its workforce and select technological assets.
Despite the acquisition, SpotOn retained ownership of the source code for its software system, with plans to continue its development within the restaurant industry. However, SpotOn will allow Shift4 to use the code under licence.
In conclusion, the M&A landscape in Q4 2023 reflected a diverse range of strategic decisions across various sectors of the financial industry, which echoed its ongoing transformation. Fuelled by a pursuit of digital advancement, companies embraced strategic partnerships and consolidation to strengthen their market positions and navigate a rapidly evolving landscape.
One crucial driver was the integration of digital technologies. Artificial intelligence, cloud computing, and other emerging solutions prompted M&A activity as companies sought to modernise operations and offerings. The integration of AI into fintech solutions emerged as a pivotal trend, promising improved customer experiences, risk management, fraud prevention, and operational efficiency. Financial institutions showed a readiness to invest in AI-driven innovations, recognising their potential to reshape industry dynamics.
Q4 2023's M&A activity underscores the dynamic nature of the fintech industry. Understanding the key trends – the focus on digital transformation, compliance with regulations, cybersecurity concerns, and consolidation within payments and commerce – provides valuable insights into the future of this ever-evolving sector.
A dedicated and inquisitive copywriter and blogger, Dragoș has extensive experience in editing and developing content related to IT and tech. After joining The Paypers, his focus turned to the latest fintech, payments, and crypto announcements. For Dragoș, connecting the dots and observing trends and developments in the industry is becoming second nature.
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