The financial services sector’s second quarter of dealmaking shows that strategic M&A is alive and well, despite a slump in deals overall.
Deal volume for financial services was down in Q2 nearly 3% from the previous quarter (and down 7.6% YoY) in the sector that includes banks, investment groups, and insurance companies, but deal value was up 22% from Q1 (and nearly 51% YoY) thanks to a few big-ticket deals, according to a recent KPMG M&A trends report.
KPMG warned regional banks must “scale or surrender.” Megadeals such as Global Payments’ purchase of Worldpay for $24.3 billion and the Columbia Banking x Pacific Premier merger drove banking M&A value through the roof, although the total number of deals was down. The Q2 M&A environment held an important lesson for regional banks: They “face a strategic crossroads as consolidation becomes imperative,” the firm noted.
Insurance firms pushed for specialization and consolidation. Insurance brokerage dealmaking dominated financial services M&A activity in the quarter. Strategic acquisitions “significantly outweigh[ed] financial buyer activity, indicating consolidation driven primarily by acquirers seeking synergies and market expansion rather than financial engineering,” according to the report.
In all, insurance-sector deal volume was down from Q1 and YoY, but total deal value shot up (nearly doubling from Q2 2024). While brokers continued their consolidation spree, insurance carriers set their sights on specialty products.
KPMG noted elevated activity “in specialty deals and smaller regional distribution transactions,” which “underscore the sector's focus on specialization and scale, enhancing market positions and driving premium valuations in strategic acquisitions.”
Capital markets seized on strategic opportunities. Deal volume and value totals were down from Q1 in the capital markets space. The deals that did get done came from “sustained strategic interest in RIAs, crypto platforms, and alternative investment firms,” which showed a continued push toward “diversification and client acquisition,” the report said.
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