Bespoke insurance solutions, such as warranty and indemnity (W&I) insurance, Directors’ and Officers’ (D&O) insurance, risk and insurance due diligence, and cyber insurance due diligence, will increasingly be required to facilitate and support mergers and acquisitions (M&A) transactions, due to the uncertainty caused by:

• the uncertainty of the global banking industry;
• rising interest rates and inflation; and
• political uncertainty and unrest.

Financial Institutions M&A

There has been a considerable level of M&A activity in the Australian financial services sector in recent years largely due to consolidation in the industry and divestments by traditional banks of their non-core businesses, for example, the acquisition of Suncorp Bank by ANZ, and the divestment by major Australian banks (CBA, NAB, Westpac and ANZ) of their wealth/asset management businesses. In 2022, CBA, Australia’s largest bank, completed the disposal of a 55% stake in a superannuation business, Colonial First State, and the disposal of a minority stake in the Bank of Hangzhou. Notably, CBA has generated approximately $11 billion in capital since it started its divestment program in 2018^[1].

Activity levels were driven primarily by significant shakeups to the regulatory landscape, such as the recent Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which increased regulatory scrutiny, compliance costs and risks for traditional banks.

In addition, M&A activity in the financial services sector was also sustained in the wake of COVID-19, due to greater liquidity, deposit funding and low yields, which allowed banks to enjoy improved returns and undertake more M&A activity^[2].

With the collapse of two major US banks and the industry bail-out of a third bank in the first quarter of 2023, we expect this will likely result in further M&A activity in the Australian financial services sector.

The report will explore the impacts on M&A for the superannuation, fintech and public sectors.

[1] 2022 Commonwealth Bank AGM: Chairman’s address (commbank.com.au), Commonwealth Bank of Australia, October 12, 2022

[2] Financial services M&A trends in ASPAC, KPMG, 2022

[3] Small and medium super funds face sustainability challenges, Australian Prudential Regulation Authority, March 29, 2022

[4] Fintech M&A deal tracker: Valuation drop sparking buyers’ interest, S&P Global Market Intelligence, August 16, 2022. S&P Global Market Intelligence

[5] Australian fintech industry well-positioned for a challenging 2023, shows significant maturity in 2022, Ernst & Young, November 2, 2022

[6] The State of Australian Start Up Funding 2021 Report, Cut Through Venture and Folklore Ventures, 2022

Aon speaker panel includes:

• Alister Burley, Construction Practice Leader
• Ben Holland, Placement Director, Construction
• Dan Chapman, Director, Credit Solutions

Please view the session recording below.