Co-head of the firm’s Financial Services Transactions group Ricco Bhasin and co-head of Torys’ Capital Markets group David Seville sat down with Canadian Lawyer to discuss the recent trends in M&A and capital markets they’ve been seeing as of late.
“2020 was the second busiest year in the sector since the great financial crisis of 2008. But what makes M&A activity in the financial services sector ‘explosive’ this time around is how the deals tie into technology, probably more than any other industry area,” Ricco said.
Coming off strong earning and return performances, David noted that financial institutions are generally flush with capital during this time of year that they could invest in organic growth or M&A.
He added, “there is significant private market capital available through pension funds and private equity sponsors to fund growth by financial institutions.”
In some cases, financial institutions will also be competing with private equity and companies in sectors outside financial services—such as grocery retailers and telecom companies.
“The buyer pool has really become largely a who’s who of the market. So, when we have auction situations, we’re seeing fierce competition… and valuations are soaring,” Ricco said.
“In certain jurisdictions, and for certain hot assets, we’re seeing up to 15-20 per cent increases [in valuations] when compared to… three or four years ago for those financial services targets.”
Moreover, Ricco and David agreed that the increased focus on environmental, social and governance factors will factor into M&A activity.
“So financial institutions will have to think hard about acquisitions, and M&A from the perspective of ‘how is it measuring ESG issues, is that method appropriate and will it fit into their ESG structure?’” Ricco added.
You can read more about our M&A work on our practice page.