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Financial M&A surges as banks and insurers hunt for scale

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City Editor

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A wave of banking and insurance tie-ups pushed the volume of UK financial services dealmaking to its highest level in more than a decade last year, new figures show.

After a slowdown in 2023, mergers and acquisitions (M&A) activity in the UK’s financial services industry rebounded last year with a 26 per cent year-on-year increase in the number of deals, according to figures from Big Four firm EY.

British banks, insurers and asset managers struck some 380 deals through the year, the highest volume of deals since 2012. The value of deals also rose to £20.2bn, up from £12.5bn the previous year.

The uptick in dealmaking among financial firms points to a hunt from City firms for scale ahead of the loosening of interest rates over the next year.

Lower rates have brought an end to a period of bumper profits for banks and fuelled consolidation in the sector. Nationwide’s £3.9bn swoop on Virgin Money and the £600m sale of Tesco’s banking arm to Barclays were among the biggest deals in the UK last year.

Insurance dealmaking also rose sharply through 2024, capped off by Aviva’s late December acquisition of Direct Line for £3.7bn. The number of deals in the sector rose from 112 in 2023 to 188 in 2024, with the total publicly disclosed deal value increasing from £3.7bn in 2023 to £4.6bn in 2024, according to EY.

While dealmaking is expected to climb throughout this year, EY warned “macroeconomic uncertainty and geopolitical tensions further abroad could create headwinds as we look to the year ahead”.

“If the UK’s economic outlook continues to gradually improve as expected, we anticipate the focus on M&A activity will continue throughout 2025 as confidence grows and firms accelerate plans to transform,” said Damian Hourquebie, EY’s UK financial services strategy and transactions leader.

Richard Battersby, EY’s head of insurance strategy and transactions, added that insurance firms were likely to continue to view “M&A as a way of maintaining growth and scale” in the next 12 months.