Financial Services

Specialist expertise across all financial services sectors

How much are companies worth in the Financial Services sector?

The following 3 graphs will give private business owners a broad indication of the value of their business:

1. The Enterprise Value to EBITDA* multiples on which comparable listed companies are trading

Financial services graph 1 - reversed


At the end of H1 2019, the global, all market average Enterprise Value to EBITDA* multiple for listed financial services companies was 18.3x. This was greater than the previous six months and up on the previous year, when listed financial services companies were trading on a multiple of 16.6x. Within the financial services sector, trading multiples varied between 14.6x and 25.5x across the range of sub-sectors. Smaller businesses generally traded on lower multiples.

* EBITDA is Earnings Before Interest, Tax, Depreciation and Amortisation
† Note, the Enterprise Value to EBITDA multiples above are for listed businesses, and it is generally the case that privately owned businesses are valued at a discount. Listed company data was accurate at 01/07/19

2. The multiple of EBITDA paid by acquirers of comparable businesses

Financial services graph 2 - reversed


The average multiple of EBITDA paid globally in financial services transactions has fluctuated over the past few years. It currently stands at 12.3x. When reviewing these  multiples we break out  businesses in the range $5-150m, as they  tend to have unique attributes which affect their valuation. Smaller businesses have generally been sold on lower multiples.

3. The volume of M&A transactions and acquisitions

financial services graph 3 reversed


In H1 2019, there were 1,370 transactions globally in the financial services sector. This is a slight increase on the preceding 6 months, when there were 1,364 transactions. Although slightly declining over the last few years, the high number in the last 6 months suggests demand for financial services businesses remains fairly buoyant.

 

For further information as to how these valuations and statistics are computed, and their impact on your transaction, please contact us.

Key financial services market themes:

1

Consolidation and relocation

Increased consolidation in the first half of 2019 has shown increased M&A activity. This comes as businesses look to expand their geographical reach and increase the scale of their operation. With firms planning for Brexit outcomes, they are also moving assets out of the UK to relocation hotspots such as Dublin or Frankfurt.

2

New fintech disruption for retail banking

New entrants to the market are disrupting the retail banking sector with total online banking services. Such as the FinTech companies Monzo and Revolut. Similarly, with the likes of  the company Robinhood offering no fees for completing equity trades, this is displacing consumers from traditional bank trading and investment platforms.

3

New technology acquisition , a key driver

M&A activity has been driven by the need for businesses to acquire new technology. This is to increase the efficiency of their business processes, keep up with rising consumer expectations surrounding innovation and take full advantage of valuable customer data analytics. HSBC for example has recently partnered with the software company, Identitii, to create an invoicing tool for corporate clients.

4

Blockchain proving difficult to implement

Blockchain in banking is proving to be a challenge to implement successfully. This comes as Sberbank, Russia’s largest bank, is winding down operations of their Masterchain blockchain project, with part of the issue surrounding the project being the lack of decentralisation. In bitcoin, a report from the UK watchdog has described it as holding “no intrinsic value”, possibly hinting at further regulations or a ban.

5

Big tech expanding into financial services

There is a growing trend of the big tech firms seeking to enter the financial services sector. In March, Apple announced the credit card, “Apple Card”, facilitated by both Goldman Sachs and Mastercard. Facebook announced it would be releasing its own cryptocurrency, Libra, with the target of becoming “the first widely used cryptocurrency”. Watchdog commissioners have expressed doubts over how Facebook plans to deal with privacy concerns as a result of Libra’s introduction.

6

Deutsche and Commerzbank cease talks

Deutsche prepares to undergo one of the largest corporate banking restructurings in history as it plans to cut 18,000 jobs (20% of its worldwide workforce). This comes after Deutsche and Commerzbank failed to agree a merger and exited talks in April with the view that the risks and costs associated with a merger would be too great for little obtainable reward. UniCredit and ING are known to have expressed interest in Commerzbank.

 
Data sources compiled by Corbett Keeling