Overview: Financial Services as a Leader in Dealmaking

The financial services sector – encompassing banking, capital markets, insurance, and asset & wealth management – remains one of the most active arenas for mergers and acquisitions (M&A) in 2025. In the United States, dealmaking in financial services has rebounded strongly after a global slowdown in 2022–2023. By 2024, monthly M&A activity in this industry returned to pre-downturn averages, and total U.S. financial services deal value jumped significantly (estimates range from ~30% to over 70% higher in 2024 vs. 2023, depending on the source). This resurgence has made financial services a strong contender in M&A volume and value, alongside traditionally dominant sectors like technology and healthcare. (Notably, technology still leads in overall deal value – see Legacy Advisors’ Technology M&A Report (2025) – but financial services is not far behind, accounting for a substantial share of big-ticket transactions.)

Several forces are driving this robust deal activity. Consolidation pressures are intense: banks and insurers are pursuing scale to spread costs and bolster resilience, while wealth managers and fintech firms are merging to diversify offerings. Technological advancements – especially in FinTech – are a major catalyst, as incumbents acquire innovative startups to stay competitive in the digital age. At the same time, an evolving regulatory landscape is creating new opportunities: after years of caution, U.S. policymakers appear more open to bank mergers, and deregulatory initiatives are easing certain barriers. Private equity (“financial sponsors”) also continues to target financial services, attracted by its stable revenue streams and critical market position. In short, financial services companies are using M&A both offensively (to transform and grow) and defensively (to consolidate and cut costs) in response to changing market dynamics.

This report provides a comprehensive analysis of recent M&A trends in U.S. financial services. We examine how deal activity has ebbed and flowed in the past few years and break down key trends by subsector – including banking, capital markets, insurance, and asset/wealth management – with a special focus on FinTech and payments. We also discuss the strategic drivers behind these deals, highlight notable transactions shaping the industry, and offer an outlook for the remainder of 2025 and beyond. Finally, for founders and owners of financial firms (particularly fintech startups), we provide an “Outlook and Advice” section on how to navigate the current M&A environment and prepare for a potential sale or partnership. The goal is to help financial services executives and entrepreneurs understand the evolving deal landscape and make informed decisions about growth or exit strategies.

M&A Landscape and Recent Trends (2022–2025)

Post-Pandemic Boom and 2022–2023 Slowdown: Like many industries, financial services experienced an M&A boom in 2021 into early 2022, fueled by abundant cheap capital and a rush to scale up. 2021 saw record deal volumes in sectors like banking and payments as companies emerged from the pandemic seeking growth. However, 2022 brought a sharp cooldown. Rapid interest rate hikes, high inflation, and geopolitical uncertainty led many dealmakers to hit pause. By 2023, financial services M&A had slowed markedly: global deal volumes fell and many announced deals were smaller in size. Rising financing costs made buyers more cautious, and regulatory scrutiny – particularly in banking – remained stringent. The first half of 2023 was especially quiet, reaching some of the lowest deal activity levels since the 2020 COVID shock. Certain high-profile challenges also gave buyers pause (for example, U.S. regional banks faced deposit outflows and a few notable bank failures in 2023, which increased uncertainty around bank acquisitions).

2024 Rebound – “Winter Thaw” in Financial Services Deals: M&A activity began to revive in late 2023 and gathered momentum through 2024. Dealmakers grew more confident as economic conditions stabilized. By mid-2024, interest rates had likely peaked, stock market valuations were recovering, and debt financing channels started reopening – creating a more favorable backdrop for acquisitions. In financial services, 2024 became a comeback year for dealmaking. Multiple analyses confirm a significant uptick: total financial services deal value in 2024 was roughly 30% higher than 2023’s total (global data), with U.S. deal flow accelerating in the second half of 2024. In fact, one study noted that for the first eleven months of 2024, financial services M&A value was about 72% higher than the same period in 2023 – a remarkable jump – even though the number of deals was slightly down. In other words, buyers focused on fewer but larger transactions, marking a shift toward quality and strategic importance over sheer volume.

Megadeals Lead the Way: A defining feature of the 2024 rebound was the return of the megadeal in financial services. Several blockbuster transactions were announced, boosting aggregate deal value. For example, Capital One’s $35+ billion acquisition of Discover Financial Services (announced in early 2024) combined two of the largest credit card issuers in the U.S. – the richest U.S. bank deal in over half a decade. This merger, spanning both banking and payments, underscored how companies sought scale and technology advantages; it was touted to deliver at least $2.7 billion in cost synergies. In payments, another enormous deal was Global Payments’ agreement to acquire Worldpay for approximately $24 billion. This transaction (announced in 1H 2025) is reshaping the payments processing landscape by merging two of the leading merchant acquirers. At the same time, Global Payments arranged to divest its own Issuer Solutions division for $13+ billion (a deal with Fidelity National Information Services) to streamline its focus – illustrating how large players are swapping assets to focus on core strengths. In insurance brokerage, Arthur J. Gallagher’s $4 billion+ acquisition of AssuredPartners (announced late 2024) was a headline deal, representing a major consolidation move in the insurance distribution space. These examples, among others, drove total deal values sharply higher. By early 2025, the first half deal value in global financial services was running about 15% above the prior year, despite a slight decline in the number of deals – reflecting the impact of these outsized combinations.

Shifting Subsector Contributions: Another notable trend is the changing mix of where M&A is occurring within financial services. Traditionally, banking (including traditional banks and lenders) made up a large portion of deal value. But in recent years, other subsectors have taken the lead. In 2024, many of the largest financial services deals happened in payments, fintech, and wealth/asset management, rather than in traditional retail banking. One analysis found that payments, fintech, and capital markets/wealth deals together accounted for roughly 66% of financial services M&A value in 2024, up from under 50% in 2020. Meanwhile, the share of bank acquisitions (by value) declined – for instance, bank deals were only ~28% of total FS deal value in 2024, down from 40–45% a few years prior. This shift reflects both opportunity and caution: high-growth areas like payments and fintech attracted big strategic bets, whereas banking M&A, while rebounding, was somewhat tempered by concerns over loan portfolio quality, capital requirements, and regulatory hurdles (more on those later).

Domestic Focus Over Cross-Border: In 2024 we also saw a bias toward domestic consolidation. About 90% of financial services deals globally were within the same country – a much higher proportion than a few years ago. During the pandemic and immediate aftermath, cross-border deals were more common, but by 2024 companies showed a preference for in-market mergers. This was driven by geopolitical uncertainty and stricter scrutiny on foreign acquisitions. U.S. financial institutions largely concentrated on U.S. targets (for example, regional bank mergers, or U.S. asset managers buying domestic rivals), rather than attempting large international tie-ups. The trend held in Europe and Asia as well, with few big cross-border bank deals materializing in those regions. While global expansion is still a strategic goal for some, the path of least resistance in 2024 was domestic M&A, where acquirers know the market and regulators better.

Early 2025 Momentum: Heading into 2025, the positive momentum has continued. The first quarter of 2025 showed sustained deal flow in financial services, and by the mid-year point, aggregate deal values were tracking well above the previous year. A mix of large transformative mergers and steady smaller acquisitions were announced across banking, insurance, and fintech. Notably, deal metrics have diverged: deal volume (number of transactions) is flat or slightly down year-over-year, but deal value is significantly up – indicating more “big fish” are being caught this year. For example, in Q2 2025, U.S. financial services saw around 1,100–1,200 deals (a few percent lower than a year prior) but total deal value jumped by over 50% year-over-year to exceed $120 billion in the quarter. One single mega-transaction (such as the aforementioned Worldpay acquisition) can skew these totals, but even excluding the largest deals, advisors note that deal quality and strategic intent have improved. Companies are more deliberate in pursuing acquisitions that truly move the needle for their growth or efficiency, and they’re willing to pay for the right targets.

In summary, the financial services M&A market has reawakened after a brief lull, with 2024 marking a turning point from “caution” back to “conviction.” The landscape is characterized by bigger deals, a focus on domestic consolidation, and a tilt toward tech-driven segments. Next, we’ll delve into the forces fueling this wave of activity and then examine each major subsector’s trends in detail.

Key Drivers of M&A Activity in Financial Services

Several structural drivers are underpinning the current M&A boom in financial services. Understanding these motivations is crucial for anyone evaluating a potential deal in this sector:

• Need for Scale and Efficiency: Economies of scale have long been a motive in banking and insurance M&A, and they are more important than ever now. Financial institutions face rising costs in technology investment, cybersecurity, and regulatory compliance – areas where size can be a big advantage. By merging, banks or insurers can spread these fixed costs over a larger base, cut redundant overhead, and improve their cost-income ratios. In 2024, many bank CEOs explicitly cited scale as a strategic priority (“scale or surrender” has become a quiet mantra among regional banks). Similarly, insurers have looked to M&A to improve operating efficiency, especially after some suffered underwriting losses – combining with a competitor can help diversify risk and shore up profitability. The recent Capital One–Discover mega-merger is a prime example: those two companies sought greater scale to compete in credit cards and payments, aiming to boost profits by sharing technology infrastructure and marketing networks. Across the board, consolidation for scale is a core rationale: in a mature market, bigger tends to be better for core financial services businesses.
• Digital Transformation and FinTech Disruption: Rapid technological change is a double-edged sword in financial services – it threatens incumbents but also offers enormous growth opportunities. This is driving a huge amount of M&A, as established firms either acquire technology or get acquired for their technology. Banks, wealth managers, and insurers are racing to digitize their offerings and modernize legacy systems. Acquiring a fintech startup or an innovative software provider can jump-start that process, essentially a “buy versus build” decision. For example, large payment networks and processors (Visa, Mastercard, Global Payments, etc.) have been on acquisition sprees to add capabilities in areas like real-time payments, fraud detection, and subscription billing – capabilities that would take too long to develop internally. In wealth management, traditional firms have bought robo-advisor platforms and portfolio analytics tech to serve a new generation of clients. Even in insurance, carriers have acquired insurtech startups that bring AI-driven underwriting tools or digital distribution channels. FinTech innovation is a major catalyst: many deals are essentially about acquiring new tech, talent (via “acqui-hire”), or data. The pace of innovation (AI, blockchain, mobile apps, etc.) is relentless, and incumbents often find it cheaper and faster to buy an innovative upstart than to catch up from behind. As a result, technology considerations are at the heart of many FS transactions today – not just in obvious cases like payments, but even traditional segments (for instance, regional banks buying a cloud-based core banking provider to upgrade their systems).
• Regulatory Environment – From Hurdle to Tailwind: Regulation is a critical factor in financial services M&A. In the decade after the 2008 financial crisis, U.S. regulators took a tougher stance on big bank mergers, and globally there was high scrutiny on any deal that could pose systemic risks. That contributed to a relatively lower volume of bank mega-mergers for many years. However, the regulatory pendulum appears to be swinging: by 2024–2025, there are signs of a more accommodative approach, at least in the U.S. The change in federal administration and agency leadership has brought “regulatory easing” in tone. There’s growing recognition that the U.S. still has over 4,000 banks (a highly fragmented market), and some consolidation might be healthy to strengthen the banking system. In early 2025, for instance, lawmakers were debating legislation (humorously dubbed the “One Big Beautiful Bill” in some circles) aimed at streamlining bank M&A approvals and raising asset thresholds that trigger intensive review. While regulatory hurdles certainly remain – any large bank deal still faces scrutiny on competition and community impact – the overall sentiment is shifting from one of resistance to cautious openness for well-justified combinations. This shift is important: it has emboldened more banks to explore mergers that they might have thought impossible a few years ago. (In Europe, regulators are also encouraging cross-border bank mergers to create stronger continental champions, though execution there has lagged the U.S.) In insurance, regulators have generally been more permissive of deals, and that continues, especially for transactions that don’t significantly reduce consumer choice. Bottom line: a favorable regulatory climate is emerging, acting as a tailwind for consolidation after years of being a headwind.
• Evolving Customer Expectations: Consumers and business clients are demanding more from financial services providers – seamless digital experiences, integrated solutions, and personalized services. This is indirectly fueling M&A as firms combine to better serve these needs. For example, a bank might acquire a fintech app to offer customers mobile budgeting tools, or an asset manager might merge with a peer to offer both traditional and alternative investments under one roof. The quest to provide a one-stop-shop or superior user experience can drive acquisitions of complementary firms. Additionally, younger, tech-savvy customers show less loyalty to legacy brands, so incumbents are buying innovative competitors before their customer bases scale up. Changing demographics and preferences (like the rise of mobile banking, or demand for self-directed investing platforms) force incumbents to either adapt quickly or risk losing relevance – and many choose to adapt via M&A.
• Interest Rates and Macro Conditions: The macroeconomic backdrop has a well-known impact on M&A. In 2022–2023, soaring interest rates made deal financing expensive and depressed company valuations, which slowed deals. As we enter 2025, there’s optimism that rates have plateaued and may even begin to ease if inflation comes under control. Indeed, late 2024 saw the Federal Reserve pause rate hikes, with some signaling that an easing cycle could commence if inflation trends downward. This matters greatly for financial services deals: lower financing costs make leveraged buyouts and large strategic acquisitions more feasible. Additionally, stabilized rates reduce uncertainty around banks’ balance sheets (fewer wild swings in bond portfolios, for example) which helps buyers and sellers agree on valuations. While inflation and high borrowing costs were an M&A deterrent in the recent past, their gradual moderation is now an encouraging sign that could unlock pent-up deal activity. Moreover, the general economic outlook – assuming no severe recession in 2025 – is cautiously positive. Steady GDP growth and decent credit quality mean acquirers can be more confident in future earnings, supporting bolder M&A bets. Of course, if macro conditions were to deteriorate sharply, that could change the equation, but as of now the economic climate is providing stability that supports dealmaking.
• Pressure on Profitability and Growth: Many financial services firms are contending with compressed margins and the need to find new growth avenues. In banking, net interest margins have been volatile (rising rates helped at first, but an inverted yield curve and higher deposit costs squeezed many banks’ spreads in 2023/24). In insurance, certain lines (like property catastrophe insurance) have faced losses and volatility. And in asset management, passive products and fee compression have hurt revenues for traditional managers. All this puts pressure on executives to either cut costs or find new revenue – often both. M&A provides solutions: cost-cutting via combining operations, or revenue enhancement by acquiring new products and distribution channels. For example, two regional banks merging can eliminate overlapping branch networks and redundant back-office operations, immediately improving their combined efficiency ratio. Alternatively, an insurance company might acquire a specialty player in a profitable niche (say, cybersecurity insurance) to boost its top-line growth where its existing lines are stagnating. M&A is seen as a faster route to hit financial targets in an environment where organic growth is modest. It’s no coincidence that in 2024, many deals were explicitly justified to shareholders as synergy plays or as diversifying into higher-growth segments.
• Private Equity and “Alternative” Capital Influence: The role of private equity (PE) and other investment funds in financial services M&A cannot be overstated. PE firms are sitting on record levels of dry powder (more than $2 trillion globally across all industries by 2025, with an estimated $500+ billion earmarked specifically for financial services deals). They have become both buyers and sellers in this space. On the buy side, PE sponsors are attracted to financial services subsectors that generate steady, recurring revenues and cash flow – for instance, insurance brokerages, wealth management firms, payment processors, and fintech software providers. These are capital-light businesses where PE can leverage growth and roll up multiple acquisitions into larger platforms. We’ve seen ongoing waves of PE-backed consolidation, such as hundreds of independent registered investment advisors (RIAs) being acquired by PE-funded aggregator firms, or insurance brokerage platforms buying up local agencies quarter after quarter. On the sell side, many PE funds that invested in financial services over the past 5–7 years are now seeking exits – which often means selling those portfolio companies either to strategic buyers or larger PE funds. Notably, in 2024 a few very large PE-backed financial services platforms were sold to strategics: e.g. AssuredPartners (backed by GTCR) being sold to Gallagher, and several big insurance brokerage sales. Private equity’s influence thus shows up as increased deal volume (through roll-ups) and also some sizable deal value when a platform changes hands. Additionally, the growth of private credit (non-bank lenders, often affiliated with PE) has provided alternative financing for M&A deals, making it easier to finance acquisitions even when traditional banks pull back. All told, financial sponsors are deeply enmeshed in financial services M&A – fueling activity with their capital and sometimes intensifying bidding competition for attractive assets.
• Portfolio Reshaping and Focus: Particularly in the insurance and asset management arenas, many companies are using M&A to sharpen their strategic focus. This often involves divesting non-core divisions and doubling down on core competencies through targeted acquisitions. In 2024, a number of large insurers sold off underperforming or non-core units – for example, Allstate exited a secondary benefits business, and Allianz sold some U.S. commercial lines operations – to reallocate capital to their main businesses. Those divestitures become acquisition opportunities for others (perhaps a smaller insurer or a PE buyer that specializes in that line). Simultaneously, those same big firms might use freed-up capital to acquire in areas where they want to grow. A phrase heard often is “balance sheet optimization” – companies shedding units that tie up too much capital or don’t fit their long-term strategy. For asset managers, portfolio reshaping might mean selling a non-core fund business (say a small mutual fund family) while buying a stake in an alternative asset manager to get into private markets. Corporate carve-outs are another facet: banks and financial conglomerates sometimes spin off tech units or services divisions that can thrive independently or under new ownership (recently FIS spun off Worldpay, as noted, and in prior years, big banks sold asset management arms). This churning of portfolios is generating M&A deals that are more about strategic pruning and growth realignment than about pure expansion. It reflects a maturing industry where success often means being excellent in a few areas rather than average in many.

In summary, financial services M&A is driven by a potent mix of offense and defense – firms are consolidating to become more efficient and resilient, and they’re acquiring capabilities to stay competitive in a tech-driven future. The supportive macro and regulatory shifts have lowered some historical barriers, unleashing a wave of pent-up strategic moves. Next, we explore how these drivers manifest in each major segment of financial services, with specific trends and examples.

Banking M&A: Consolidation with Conviction

Renewed Regional Bank Consolidation: U.S. banking M&A has come back into focus with a “scale or fail” mindset. After a quieter 2022–23, the year 2024 saw a notable rebound in bank deals, especially among regional and mid-sized banks. By the end of 2024, 215 U.S. bank deals (over $30 million in value) had been announced, up from only 151 comparable deals in 2023 – a clear sign that banks are once again pursuing combinations. The environment for regional banks in particular has been challenging: they face pressure from rising funding costs, fintech competitors poaching customers, and the need to invest heavily in digital capabilities. Rather than trying to go it alone, many are opting to merge with peers to gain scale. For instance, a merger of equals between SouthState Bank and Independent Bank Group was announced, combining two strong regional players in the Southeast and Texas regions. Such mergers allow banks to expand geographically, increase their lending capacity, and cut duplicative costs (like consolidating headquarters, branches, and IT systems). The logic is straightforward – a larger balance sheet and branch network can better absorb today’s costs and compete in tomorrow’s market.

Big Bank Deals – No Longer Off the Table: While most bank M&A has been between small and mid-sized institutions, 2024 proved that even larger bank deals are possible when strategically compelling. The headline-grabber was Capital One’s proposed takeover of Discover, a bold move that would create one of the largest credit card issuers and consumer banks in the country. With a price tag over $35 billion, this deal signaled that U.S. regulators might permit large combinations if the circumstances are right (in this case, the two companies’ businesses were complementary – Capital One strong in credit cards and auto lending, Discover known for its card network and direct banking – and the combined entity promised efficiencies and continued competition with bigger players like Chase). Regulators ultimately gave approvals by mid-2024 with some conditions, indicating a shift to pragmatism: rather than blocking all big bank deals, authorities seem willing to consider those that don’t overly concentrate local deposit markets or harm consumers. This potential green light has emboldened other large banks to at least explore acquisition opportunities. Surveys of bank executives in late 2024 showed a dramatic change in attitude: many more large-bank CEOs stated they are “open to acquisitions” or actively scanning for targets, compared to a year prior.

Drivers: Cost Synergies and Technology Sharing – Bank M&A in this cycle is heavily driven by the hunt for cost savings and tech efficiency. Inflation in 2022–23 pushed up banks’ expense bases (e.g. salary costs, branch operating costs), and at the same time, banks face multi-year investments in core technology, mobile apps, and cybersecurity. A merger lets two banks consolidate corporate functions (one accounting department, one HR, etc.) and branch networks, potentially saving millions. For example, in the Capital One–Discover deal, the banks projected at least $2.7 billion in annual cost synergies by eliminating overlapping operations and vendor contracts. Those savings directly improve profitability, which is very appealing when organic profit growth is hard to find. Additionally, in many bank mergers today there is an explicit plan to share technology and innovation. One partner might have a better digital banking platform, or a successful fintech partnership, which can be rolled out across the combined institution. In essence, getting bigger allows banks to spread tech investments and roll out new digital products more broadly. Conversely, smaller banks worry that if they don’t gain scale, they won’t be able to afford cutting-edge tech, and will fall further behind.

Fragmentation and Competitive Pressures: The U.S. banking market remains highly fragmented (thousands of community banks still exist) and is also highly competitive, not just from other banks but from credit unions, fintech companies, and even “big tech” in payments. This competitive pressure is another motivator for consolidation. Banks want to increase their market share and customer base – an acquisition can instantly add tens or hundreds of thousands of customers that would take years to grow organically. There is also a defensive angle: acquiring a competitor in your region prevents that competitor from taking more of your business, essentially eliminating competition in a given locality and strengthening the acquiring bank’s position. The past year saw numerous deals where a strong regional player scooped up a smaller local bank to become the #1 or #2 player in a state or metro area. For example, Columbia Banking System merged with Pacific Premier Bancorp (a West Coast transaction) to create a more formidable regional bank with coast-to-coast presence. These deals shore up market share at a time when even big banks are encroaching into smaller markets via digital channels.

Navigating Regulatory Review: Despite the more positive M&A climate, bank dealmakers must still navigate regulatory reviews by the FDIC, OCC, Federal Reserve, and sometimes state regulators. The process can be lengthy – large mergers can take 6–12+ months to get approved – and there’s an ever-present risk that political changes could bring back a tougher stance. Banks pursuing deals in 2025 are often proactively addressing regulatory concerns upfront: for instance, they outline plans to invest in local communities and branch access (to alleviate fears of branch closures harming consumers), and they prepare strong analyses showing that competition will remain healthy post-merger (for example, citing that customers have ample online banking options, etc.). Some also choose targets that fill gaps rather than create huge overlaps, which can smooth the path. Encouragingly, there have been recent cases of approvals: in mid-2025, regulators approved a merger between two mid-sized banks in the Midwest in under 5 months, which bankers view as a positive precedent. If this trend holds – with predictable, timely approvals – it will further grease the wheels for bank consolidation. However, banks are also mindful of not overreaching; truly massive combinations (like two of the top four megabanks merging) are still off the table for competitive reasons. The focus instead is on the tier below – regionals combining to become super-regionals, etc.

Distressed and Opportunistic Bank M&A: It’s worth noting that not all bank M&A is born of strength; some is driven by distress or opportunism. The banking turmoil in March 2023 (when institutions like Silicon Valley Bank and First Republic failed) demonstrated that healthier banks or investors may step in to acquire assets of failed or struggling banks. JPMorgan’s government-facilitated acquisition of First Republic’s assets in 2023 was a notable example. In 2024–25, if any banks run into trouble (due to bad loans or liquidity issues), stronger competitors will likely view it as a chance to acquire assets or deposits at a bargain via FDIC-assisted deals. This dynamic – rescue acquisitions – is a perennial part of banking M&A. While we hope for a stable environment, bank CEOs keep a shortlist of potential deals they’d pursue if an opportunity arises to buy a competitor under duress. Such deals can be very accretive, though they come with execution risks. Overall, the combination of strategic mergers among healthy banks and occasional opportunistic takeovers of weak banks will continue to reduce the total number of banks in the U.S., extending a long-running consolidation trend.

Outlook for Banking M&A: Bank M&A sentiment is the strongest it has been in years. As one industry commentator quipped, “U.S. regional banks have a choice: scale or surrender.” We expect a steady stream of bank deals in 2025, particularly in the middle market of banks with $10 billion to $100 billion in assets. These institutions realize that pairing up can catapult them into the top-tier league where economies of scale are greatest. We also anticipate more bank-fintech convergence: some banks will acquire fintech firms (like digital lenders, payments startups, or banking-as-a-service providers) to enhance their offerings. On the flip side, a few large fintech companies are now obtaining bank charters or acquiring small banks to get deposit funding and regulatory footing (the inverse scenario, e.g. fintech LendingClub acquiring Radius Bank in 2021). That trend could continue as well. The wild cards remain regulatory and macro risks – e.g., if interest rates were to spike again unexpectedly or if a new regulatory regime tightens rules, that could dampen enthusiasm. But currently, with interest rates stabilizing and a pro-business regulatory approach, the stage is set for an upswing in bank consolidation. The long-term result will likely be a leaner banking sector with fewer, larger players that are more tech-enabled and geographically diversified.

Insurance M&A: Portfolio Focus and Specialization

Strategic Refocusing & Divestitures: The insurance industry’s M&A narrative in the past year has been centered on “sharpening the focus.” Many insurers, especially large property-casualty and life insurance carriers, have been reassessing their portfolios after a turbulent period (2022–23 saw challenges like catastrophe losses, pandemic-related claims, and low investment yields). In 2024, a number of insurers decided to divest non-core businesses or underperforming lines to free up capital and management bandwidth. These divestitures have been a big driver of insurance deal activity. For example, Allstate sold its business focused on employer voluntary benefits to a smaller specialist firm, exiting that niche to concentrate on its core personal lines. Allianz, the European giant, similarly shed a U.S. mid-market commercial insurance unit and an entertainment insurance division, essentially pruning in areas where it wasn’t a market leader. Such moves are representative of a broader trend: carriers unloading sub-scale or non-core divisions. The buyers of these divested units could be other insurers looking to grow in that line, private equity firms (which often see an opportunity to turn around or roll up the business), or even insurtech companies seeking an entry via acquisition of a legacy portfolio.

This wave of divestitures in 2024 means that net M&A activity for some insurers was actually about slimming down rather than expanding. One analysis of the year noted that, if you subtract divestitures from acquisitions, a few big insurers had “negative” net M&A – meaning they sold more business value than they bought. However, this clean-up sets the stage for the next phase: with troubled books of business offloaded and balance sheets shored up, insurers are positioning themselves to pursue more growth-oriented acquisitions in 2025. Indeed, by late 2024 we saw two “transformative” insurance deals signal a return to growth: Gallagher (a top insurance broker) acquiring AssuredPartners, and UK-based Aviva buying the insurance company Direct Line’s core business. Both happened in the final months of 2024, suggesting confidence that the worst challenges were behind and the time for bold moves had arrived.

Insurance Broker Consolidation – The Juggernaut Continues: Insurance brokerage (the distribution side of insurance, including insurance agencies, brokers, and managing general agents) has been the hottest area for M&A in the insurance sector for several years, and it remained so through 2024–25. Deal volume in insurance brokerage is consistently high, far outpacing deal volume among insurance carriers. The brokerage market – serving as intermediaries selling insurance policies – is highly fragmented with thousands of independent agencies, making it ripe for consolidation. Both strategic acquirers (large global brokers like Marsh McLennan, Aon, Gallagher, Brown & Brown) and private equity-backed broker platforms have been voracious buyers. In 2024, something notable happened: the big strategics started buying the large PE-backed platforms. For instance, Aon acquired CoverWallet (a digital broker) earlier on, and Marsh and Gallagher each made acquisitions of substantial agencies that had been built up by private equity. This indicates a maturation: some of the brokerage platforms got so large (multi-billion valuations) that an IPO or sale to a strategic became the logical exit for their PE owners. The strategics, flush with cash and eager to cement their market leadership, have been willing to pay up for these deals. Consequently, brokerage M&A values soared – even though the count of deals might have slowed slightly from record highs, the average deal sizes increased.

The drivers for broker M&A are straightforward: revenue synergies from cross-selling, broader geographic reach, and the ability to negotiate better terms with insurance carriers due to increased volume. Importantly, brokerages are attractive because they have steady fee-based revenue (commissions on premiums) and relatively low capital requirements – ideal for financial buyers. As long as interest rates don’t go too high (which would hamper PE’s leveraged financing), expect this consolidation to keep going. Every region of the U.S. has seen local agencies being snapped up one after another. By 2025, the top 10 brokers command a growing share of total premiums placed, and that is set to rise further with each acquisition.

Specialization and High Multiples: Within both insurance companies and brokerages, niche specialization has become highly prized, and valuations reflect that. Buyers have been paying premium multiples (high EBITDA or revenue multiples) for firms that have a strong foothold in specialty lines of insurance. For instance, agencies specializing in cyber insurance, excess & surplus lines, or high-net-worth personal coverage are in hot demand. These areas often have higher margins or growth prospects. A cited trend is “specialty is the new standard” – meaning acquirers prefer to buy a firm known for expertise in a particular product or customer segment rather than a generalist. This has led to what industry insiders call multiple expansion: whereas a plain-vanilla insurance broker might sell for, say, 8× EBITDA, a specialty player in a hot line could fetch well above 10×, sometimes even into the mid-teens multiples if there’s a bidding war. Similarly, on the carrier side, an insurer that dominates a niche (like pet insurance or drone liability coverage, hypothetically) would be an attractive takeover target for a larger insurer wanting to enter that niche quickly.

Throughout 2024, despite overall insurance deal volume being down (fewer deals), the deal valuations were up – reflecting those higher multiples and larger transactions. One report noted U.S. insurance deal value was up over 50% year-on-year, even though the number of deals dropped by double digits. In plain terms, fewer deals got done, but they were bigger and more expensive. This suggests confidence among acquirers that the targets they’re buying are worth the price due to their strategic value.

PE’s Play in Insurance: Private equity has a multifaceted involvement in insurance. Beyond backing broker roll-ups, PE firms have also targeted insurance carriers in certain segments, typically via take-private deals or carving out units from larger companies. One area is the life insurance and annuity space, where PE-backed vehicles have acquired blocks of policies or entire divisions (often to manage them for yield, given PE’s investment management strategies). Another is run-off specialists – firms that buy closed books of insurance policies and run them off profitably. Additionally, the growing field of insuretech saw significant venture and PE funding in the late 2010s; by 2023–24, some insurtech startups struggled and became acquisition candidates (either by PE as turnaround projects or by incumbents for their tech). Overall, PE’s roughly half-trillion in dry powder earmarked for financial services deals is partly aimed at insurance because of its sizable market and the potential to apply financial engineering. However, PE faces some limitations: heavily regulated insurance companies require approvals and involve capital constraints that not all PE players are comfortable with. Thus, PE has been more active in the lighter segments (brokers, agencies, tech/service providers to insurers) and very selectively in carriers (usually via specialized insurance-focused PE firms or in partnership with reinsurance companies).

Outlook for Insurance M&A: The insurance sector appears poised for further consolidation and realignment in 2025. As insurers emerge from the tough underwriting cycle of the early 2020s, they are refocusing on growth. We expect carriers to resume strategic acquisitions – possibly targeting insurtech firms for capabilities, or acquiring regional insurers to expand geographic reach. Notably, some multinational insurers that retrenched might now look to re-enter or strengthen positions in key markets through M&A. On the brokerage side, the wave of consolidation has momentum; more mid-sized agencies will likely sell to either the big three brokers (Marsh, Aon, Gallagher) or to the next tier of PE-backed consolidators. It’s also likely we’ll see more “strategic exits” of PE investments – meaning the large platforms built by private equity could continue to be absorbed by strategic buyers in chunks or entirely. If U.S. regulators maintain a favorable stance, even very large insurance deals (like AIG merging with a rival, purely hypothetically) aren’t out of the question, although no such mega-insurer deal is rumored as of now. More probable is cross-border activity: e.g. an Asian or European insurer acquiring a U.S. insurer, taking advantage of the strong dollar or vice versa.

Finally, insurtech consolidation will be an area to watch. Many standalone insurtech startups (digital-native insurance providers) have struggled to achieve profitability. We expect some will seek to be acquired by traditional insurers that can provide capital and scale. One example from the recent past: insurtech auto insurer Metromile was acquired by peer Lemonade in 2022 after failing to grow independently – and Lemonade itself, a larger insurtech, has partnered or acquired smaller ones. That pattern could continue in 2025, essentially folding innovative tech and teams into more established insurance businesses. The overarching theme for insurance M&A is “optimize and grow” – optimize the portfolio by selling non-core pieces, and grow by acquiring in priority areas. The sector is conservative by nature, but as stability returns, insurers will cautiously pursue deals that position them better for the future.

Wealth & Asset Management M&A: Embracing Alternatives and Scale

Alternatives Drive Deals: The asset management and wealth management arena is undergoing a profound shift, and this is fueling a lot of M&A and partnership activity. The rise of alternative investments – private equity, private credit, real estate, infrastructure, hedge funds – has been the biggest trend in investing over the past decade. Traditional asset managers (those focused on mutual funds, stocks/bonds, etc.) have seen investors allocate more money to alternative asset managers, who promise higher returns and diversification. As a result, many traditional firms are scrambling to get into the alternatives game. In 2024, we saw landmark deals reflecting this: the world’s largest traditional asset manager, BlackRock, agreed to acquire HPS Investment Partners (a major private credit and alternative investment firm) for around $12 billion. This deal allows BlackRock to vastly expand its private credit offerings, giving its clients access to more high-yield private debt strategies. It’s one of three such acquisitions BlackRock made in 2024 to bolster its alternatives business.

Simultaneously, the big alternative asset managers – think of giants like Apollo, KKR, Carlyle – have been pursuing deals to scale up even further. These firms have enjoyed rapid growth (one analysis showed alternative asset managers’ market caps quadrupling over five years, far outpacing traditional peers). Now they are using M&A to cement their dominance. For example, Apollo Global Management formed an exclusive $25 billion partnership with Citigroup in 2024, essentially tying up with a major bank to distribute Apollo’s private credit products to Citi’s clients. While structured as a partnership rather than a full acquisition, it underscores how alternative managers are leveraging deals to expand distribution and access to capital. We also see alternative managers buying niche players or teams to round out their capabilities – e.g. a private equity firm acquiring a real estate investment manager to add real estate assets to its portfolio.

This push into alternatives has meant that deal value in the wealth/asset management sector more than doubled in 2024 versus 2023 (by one count covering the first 11 months). That’s huge – and it’s because a few very large transactions (like the BlackRock one) juiced the totals, and also because there were numerous smaller acquisitions in the alternatives space. Traditional firms are essentially saying: “if you can’t beat ‘em, join ‘em” – rather than losing clients to alternative specialists, they’ll buy those capabilities. We anticipate more of this in 2025, as any asset manager without a strong alternatives platform is feeling pressure to obtain one, fast.

Wealth Management Roll-Ups: On the wealth advisory side (financial advisors, private wealth management firms serving retail and high-net-worth clients), M&A has been brisk as well. The wealth management industry in the U.S. includes thousands of independent advisory firms (RIAs). Similar to insurance brokerage, it’s fertile ground for consolidation because of fragmentation and the benefits of scale (larger firms can offer more services, have better technology, and negotiate better product fees). Over the past few years, both banks and PE-backed platforms have been acquiring RIA firms aggressively. Banks see acquiring wealth managers as a way to capture stable fee income and deepen relationships with affluent customers. For example, some regional banks have bought boutique wealth firms to build out their wealth management divisions. Private equity loves RIAs because they generate recurring revenue (management fees on assets under management) and often have high margins.

In 2024, RIA M&A slowed a bit in the first half due to market volatility but picked up later as valuation expectations between buyers and sellers came more in line. By year’s end, a number of sizable RIA transactions were announced, contributing to the uptick in overall asset/wealth management deal value. A notable trend is consolidation among the consolidators: some of the big RIA aggregators (firms that had rolled up dozens of RIAs with PE backing) themselves became targets for either even larger entities or new PE buyers. This echoes what happened in insurance brokerage. Essentially, as these platforms mature, early investors look for exits, and new money or strategic buyers step in to continue the growth story.

Economies of Scale vs. Need for Alpha: The strategic rationale for asset/wealth management M&A can be seen in two categories: scale and products. Scale is important because managing more assets can improve profitability – firms can spread compliance, technology, and sales costs over a larger asset base. This is especially true as fee pressures mount (investors are pushing for lower fees; in some traditional asset classes, fees have been compressing). So by merging, two asset managers can cut overhead and have more leverage to maintain margins. A vivid example was Morgan Stanley’s acquisitions of Eaton Vance and E*Trade a few years ago – those were partly about capturing more assets and clients to scale up. Now, others are following suit.

The second category, products (or “alpha” generation), is about acquiring capabilities that generate higher returns or unique investment products. Traditional managers are buying alternative managers, as discussed, to offer clients things like private credit or venture capital investments (which clients want for diversification and potentially higher yield). Wealth management firms similarly might acquire a specialized firm – for instance, one with expertise in advising ultra-high-net-worth families or one with a robo-advisor platform to attract younger tech-savvy investors. Product expansion is a key motive: the most successful asset managers going forward likely have a diverse menu (public equities, private assets, passive index funds, active funds, etc.). Through M&A, firms can fill gaps in their product lineup quickly.

PE’s Role: Private equity firms are deeply involved in asset management M&A, not only as acquirers of wealth management firms but also as instigators of change in the industry. In some cases, PE firms have taken stakes in traditional asset managers (for example, there have been instances of PE buying minority stakes in mutual fund companies to help drive consolidation). Also, some alternative asset managers themselves have gone public or merged (e.g., the merger of Ares Management with a secondary market firm, or Blue Owl Capital’s formation via SPAC merging multiple alt managers). The lines between strategic and financial buyers blur a bit here, because an alternative asset manager making an acquisition is a strategic move, but these firms often behave like financial buyers too. The net effect: lots of capital is targeting the asset/wealth space. In fact, private equity funds are often behind the scenes financing some of the RIA acquisitions done by strategic consolidators.

Outlook for Asset/Wealth M&A: We expect continued high deal activity in this segment. Traditional asset managers that have not yet done a transformative deal will feel pressure to do so – either merge with a peer to cut costs or acquire an alternative shop to boost growth. The notion of a mega-merger of two large traditional asset managers is always possible if they see no other way to compete (for example, speculation occasionally arises about firms like Invesco, State Street’s asset management arm, Franklin Templeton, etc., possibly combining in some fashion – though nothing concrete yet). What seems more certain is more deals like BlackRock-HPS: big players buying specialists.

In wealth management, the RIA roll-up trend should persist as long as there are sellers willing to sell and buyers can secure financing. Many aging financial advisors are looking for succession plans – being acquired by a larger firm can provide an exit path for those principals. Meanwhile, well-capitalized aggregators will continue to buy up those smaller firms to build national-scale wealth managers. By 2025–2026, we might see a few dominant independent wealth management firms emerge from this consolidation wave, possibly even going public.

It’s also worth noting cross-sector convergence: asset managers and insurers are increasingly interacting via M&A. For example, some alternative asset managers have acquired stakes in insurance companies to get permanent capital (life insurers have lots of investable premiums that alt managers want to manage). Conversely, insurers have bought asset managers to internalize expertise. We anticipate more of these crossovers, blurring lines between what is an “insurance deal” and an “asset management deal.”

Ultimately, the asset and wealth management industry is striving for a balance: firms need scale to survive margin pressures, and special products to thrive in attracting clients. Those that can achieve both through smart M&A will likely be the winners, while those that stand still may themselves become targets for acquisition.

Capital Markets M&A: Data, Technology, and Niche Opportunities

The “capital markets” segment here refers to a broad swath of financial services outside of traditional banking – including investment banks, trading platforms, stock exchanges, market data providers, fintech infrastructure, and others that facilitate capital flows. M&A activity in this area has been more selective and strategic rather than high-volume, but there are notable trends:

Market Infrastructure Consolidation (Mostly Complete): Over the past decade, many of the big exchange groups and trading platforms have already consolidated significantly. For instance, ICE (Intercontinental Exchange) acquired the New York Stock Exchange years back and more recently the mortgage tech firm Ellie Mae and data provider Black Knight (completed in 2023 after regulatory scrutiny). Nasdaq has acquired trading tech and surveillance firms. The London Stock Exchange (LSEG) made a blockbuster purchase of Refinitiv (data provider) in 2021. These moves mean that as of 2024/25, there are fewer large targets left to acquire in the traditional exchange/data space. The result: capital markets M&A now tends to focus on smaller, tuck-in acquisitions that add specific technology or data capabilities. As McKinsey noted, “relatively few large targets remain” in this space, so firms are looking to augment capabilities via smaller deals.

Expansion into Data & Analytics: One clear theme is exchanges and trading firms buying companies that provide data, analytics, or technology services that can be offered to their client base. The logic is that owning data/tech businesses can diversify revenue (beyond transaction fees) and create more integrated solutions for clients. For example, in 2022-2023, Nasdaq acquired a series of fintech and anti-financial-crime tech companies to bolster its suite of services for banks and brokers. In 2024, we saw continued interest in companies that specialize in things like trading analytics, risk management software, and alternative data feeds. These acquisitions might not grab headlines because they’re often mid-sized (tens or a few hundred million dollars), but collectively they indicate capital markets players investing in the technology value chain of trading and investment.

Crypto and Digital Assets M&A: After the crypto boom and bust cycle (with 2022’s crash and exchange failures), the digital assets space started to stabilize in 2023/24, and some mainstream financial firms saw an opportunity to step in. There have been a few strategic acquisitions involving crypto trading platforms and related tech. A case in point: Coinbase’s acquisition of a stake in Deribit (a crypto derivatives exchange) for nearly $3 billion, which happened in 2025. This deal gives Coinbase a foothold in crypto options and futures trading, expanding its product breadth beyond just spot crypto trading. It underscores that established players (or the more established crypto companies like Coinbase) are consolidating the crypto infrastructure after weaker hands were shaken out. Additionally, traditional capital markets firms (exchanges, brokerages) have been exploring acquisitions of crypto custodians or blockchain tech firms to prepare for a future where tokenized assets and crypto could be more significant. We expect some incremental M&A here: not a flood, but selective buys of firms with regulatory licenses or tech in digital assets. It’s a frontier that’s slowly integrating with the mainstream financial system.

RIAs and Financial Advisory Platforms: We discussed RIA consolidation under wealth management, but from a capital markets perspective, some investment banks or broker-dealers have been acquiring advisory firms or FinTech platforms that connect to the capital markets. For instance, larger brokerages have acquired robo-advisor platforms or trading apps to get more retail order flow. Also, there’s ongoing consolidation among independent broker-dealers (the firms that support networks of financial advisors). This blurs into wealth management, but because broker-dealers operate in capital markets (facilitating trades, etc.), we include it here. The motivation is often to gain distribution scale – for example, one broker-dealer buying another to have a larger sales force for investment products.

Regtech and Compliance M&A: Another niche but important area is regulatory technology (regtech) and compliance solution providers. Capital markets firms operate in a highly regulated environment and face complex compliance challenges (trade reporting, KYC/AML, etc.). We have seen banks and exchanges acquire specialty regtech companies to enhance their compliance infrastructure or even to offer compliance-as-a-service to clients. For example, exchanges might buy a surveillance tech company that helps detect market manipulation across trading venues (Nasdaq has done deals like this). As regulatory burdens evolve (like the SEC’s new rules on trading, or Europe’s MiFID updates), having cutting-edge compliance tools is vital, and acquiring them is one route.

Selective Moves in a Volatile Environment: Overall, M&A activity in capital markets tends to mirror the capital markets’ own condition – which in recent years has been volatile. 2022’s bear market made some firms cautious. 2023–24’s partial recovery improved confidence but also saw big swings (e.g., interest rate volatility affecting trading volumes). In such an environment, deals are carefully chosen. Data from 2024 indicates capital markets deal volume was roughly flat to slightly down, and deal value was modestly up, meaning there were a few decent-sized deals but no massive wave. Firms are willing to do deals, but they must be clearly strategic. For instance, an investment bank might acquire a boutique advisory firm to strengthen coverage in a hot sector (like acquiring a healthcare-specialist M&A advisory boutique to gain market share in that industry’s deal flow). Or a trading firm might buy a smaller competitor that has a foothold in a niche market (like commodities or FX trading) to diversify its trading operations.

Outlook: Looking ahead, capital markets M&A is likely to stay focused on targeted capabilities rather than large scale mergers. The industry has already consolidated significantly at the top. Regulators would likely challenge any attempt by major exchanges to merge with each other (antitrust concerns). Instead, we anticipate a steady drumbeat of small to mid-sized acquisitions:

• Exchanges and market operators will buy tech firms (cloud trading systems, AI analytics providers, etc.) to modernize and expand their offerings.
• Traditional financial institutions will cautiously enter the digital asset space by acquiring regulated crypto platforms or infrastructure, especially if crypto continues to mature.
• There may be some regional consolidation – e.g., a European exchange buying a smaller Asian exchange to extend global reach – but in the U.S., exchange consolidation is largely done.
• If equity markets remain healthy, investment banks might use excess capital to buy bolt-on businesses (like asset management arms or fintech partnerships) that complement their capital markets franchises.
• Geopolitical factors could also play a role: for instance, if certain countries restrict foreign ownership of financial infrastructure, it might limit cross-border deals; conversely, if relations improve, we could see more cross-border investments.

One interesting angle: data is the new gold in capital markets. Any company that owns unique data (be it market data, ESG data, consumer financial data for credit, etc.) could become an acquisition target for a larger financial information conglomerate. We’ve seen this with LSEG buying Refinitiv, S&P buying IHS Markit, etc. That trend will continue. Companies that can offer feeds or analytics on the massive flows of information in markets will fetch high interest.

In summary, capital markets firms are in a phase of refinement rather than revolution in M&A. They’re refining their capabilities and positioning for the future (which will be highly digital and data-centric), but the era of mega-deals in this space is probably behind us for now. The focus is on quality over quantity of deals – the right acquisition can yield outsized benefits even if it’s not huge in price.

FinTech and Payments: Technology-Driven Transformations

No discussion of financial services M&A is complete without highlighting FinTech, which intersects all of the above segments but has its own distinct ecosystem. FinTech companies – from digital payment processors to online lenders, neobanks, crypto startups, and beyond – were darlings of investors in the late 2010s, peaking around 2021 with sky-high valuations and funding. The past few years have been more sobering: 2022 and 2023 saw a pullback in fintech funding, many startups struggled to maintain growth, and some high-fliers had to cut costs or fold. This shakeout is now leading to a wave of FinTech consolidation, and established financial institutions are seizing the chance to acquire innovative tech at more reasonable prices than a few years ago.

2023 – The Bottom for FinTech Funding: By 2023, venture funding for fintech companies had fallen sharply from 2021 highs. Many fintechs that had expanded rapidly (perhaps too rapidly) were burning cash and faced limited options: raise new capital at a down valuation, or find a buyer. At the same time, rising interest rates hurt certain fintech business models (for example, buy-now-pay-later providers saw higher default risks, online mortgage lenders saw volumes crash in a high-rate environment, etc.). Consequently, fintech valuations reset lower, creating a buyer’s market in many cases by 2024.

2024/25 – Incumbents and Big FinTechs Go Shopping: With valuations more grounded, banks, insurers, and large fintech companies themselves started acquiring. A key driver is to secure technology and talent that can accelerate digital strategies. For instance, traditional banks have acquired fintech platforms that specialize in areas like small-business online lending, automated account opening, or personal financial management tools. These acquisitions allow banks to improve their customer experience and product range overnight. A notable example: Mastercard’s acquisition of FinTech firm Minna Technologies in 2024. Minna is a subscription management platform (it helps bank customers manage and cancel subscriptions easily). Mastercard bought it to enhance the services it offers through banks to cardholders, reflecting how even infrastructure players like Mastercard/Visa are adding fintech services on top of payments.

Large fintech companies are also consolidating among themselves. Block (Square), PayPal, Stripe, SoFi, etc., have all done acquisitions to broaden their ecosystems. In 2024, Stripe – one of the largest fintechs – acquired a smaller startup called Bridge which works on stablecoin payments integration. This deal gave Stripe a toehold in crypto-enabled payments (stablecoins being a bridge between crypto and traditional money). Another high-profile fintech deal was Shift4’s acquisition of Revel Systems (a point-of-sale and restaurant software provider) – Shift4 doubled down on its integrated payments strategy by buying a software platform used by many hospitality merchants, thereby securing more payment volume through its systems.

We also saw FIS (Fidelity National Information Services), a major fintech incumbent, reconfigure itself through M&A: after acquiring Worldpay in 2019, FIS struggled and in 2023–24 decided to divest Worldpay. A private equity group took a majority stake, and as we noted, competitor Global Payments then stepped in to acquire the rest of Worldpay in 2025. This illustrates how fintech M&A isn’t just startups being bought – sometimes large fintechs spin off or swap pieces among themselves as strategies change. In FIS’s case, they opted to focus on their core processing business and let go of the merchant payments arm, whereas Global Payments wanted to double down on merchant acquiring.

Payments Sector Resurgence: The payments sector (encompassing everything from card issuers, payment processors, merchant acquirers, payment gateways, to fintech payment apps) had a quiet 2023 but roared back in 2024. One reason: the secular trend of electronic payments growth remains strong (cashless transactions keep rising worldwide). Many payments companies had delayed deals in 2022–23 due to market uncertainty, but once conditions improved, they resumed their strategic plays. We already highlighted some mega-deals like Capital One-Discover (which combined major card issuers) and Global Payments-Worldpay. Beyond those, Visa and Mastercard have been continuously active in snapping up smaller companies that provide adjunct services – examples include identity verification firms, open banking tech companies, and real-time payments startups. In late 2024, Visa acquired Tink (an open banking platform in Europe) and a few identity/fraud startups; Mastercard did similarly with acquisitions like Ekata (digital identity) and the above-mentioned Minna (subscription management). These moves are about bolstering trust and security in payments – as digital transactions grow, so do fraud risks, so the networks are buying capabilities to safeguard payments (and to offer value-added services to banks and merchants).

Consolidation vs. Innovation: The interesting dynamic in fintech M&A is balancing consolidation with innovation. On one hand, a considerable share of the payments sector is already consolidated (a few big processors handle a large chunk of volume). This limits how many mega-mergers can happen – antitrust concerns would likely block, say, Visa from acquiring Mastercard or Fiserv merging with Global Payments (just hypothetical extremes). So as McKinsey noted, the potential for more multi-billion new combinations in core payments is limited because the big players already combined or the remaining ones are needed competitors. Thus, the focus is shifting to smaller “capability deals.” Instead of huge mergers for scale, payments firms are buying startups or niche providers to gain specific tech or enter new markets. For example, a payments company might acquire a Buy-Now-Pay-Later fintech to offer that payment option, or a cross-border payments fintech to expand globally. These deals may be only $50M or $200M in size, but strategically important. A slew of such deals in aggregate can reshape offerings.

Public-to-Private and Exits: Another factor – some fintech companies that went public during the boom (or via SPACs) have struggled as public companies. Their stock prices fell, making them potential targets for acquisition or taking private. We haven’t yet seen a rash of take-privates, but the conditions are ripe for it: lower valuations and heavy regulatory/reporting burdens could drive some fintechs to accept buyout offers. There’s speculation that some mid-sized publicly traded fintechs (like smaller digital banks or specialty lenders) could be taken private by PE or bought by larger banks who prefer to integrate them. For instance, a digital mortgage lender or an online brokerage could be on the radar of a bigger financial institution looking to bolster those capabilities.

Fintech M&A Data Points: By mid-2025, global fintech M&A deal volume was up slightly (about a 5% increase year-over-year) and on pace to exceed full-year 2024 levels, according to investment banking data. While it might not reach the frenzy of 2021, it’s a clear recovery. North America – especially the U.S. – leads this activity, accounting for roughly 40% of global fintech deals by count. Europe follows, with Asia a bit behind (Asia’s fintech scene is vibrant but often deals are domestic and sometimes not reported as clearly). Importantly, about two-thirds of fintech deals in 2025 have involved strategic buyers (established companies, including both incumbents and mature fintechs), while roughly one-third were financial buyers (PE, VC, etc., often doing add-on acquisitions for portfolio companies). This mix shows that incumbents are heavily involved – fintech is no longer just the domain of startups trading among themselves; the big banks and financial conglomerates are actively acquiring in the space.

A notable sub-trend is the focus on recurring revenue fintech models. Buyers prefer fintechs with subscription or transaction-based revenue that is predictable and not dependent on heavy lending risk. For example, software-as-a-service (SaaS) fintech platforms (like a cloud core banking software provider) or payments processors that earn per transaction are very attractive, compared to, say, a fintech lender that takes credit risk (which can be more volatile). Strategic acquirers are cherry-picking those “asset-light” fintech businesses because they integrate well and don’t add credit exposure. One example: a fintech called Maza Financial (a consumer banking software provider with recurring revenue) was acquired in 2025 for about $40 million after demonstrating nearly 300% annual revenue growth. This shows that even relatively small fintechs with strong metrics can find buyers willing to pay decent multiples.

Outlook for FinTech & Payments M&A: All signs point to continued high activity here. Fintech is essentially the R&D lab for the financial industry at large; when funding to standalone fintechs tightens, the natural exit is acquisition by a bigger player. We expect more banks to scoop up fintechs that complement their services (e.g., a regional bank might buy a fintech offering budgeting tools or a niche lending platform). We also foresee more consolidation among fintech peers – for instance, two fintech payment companies merging to combine their customer bases and achieve profitability through scale. The payments sector, after the big deals of 2024/25, might see a pause in mega-deals simply because the biggest have been done, but lots of small acquisitions will happen as the players integrate vertically (e.g., acquiring software vendors, value-added service providers) and geographically (expanding into new countries via M&A).

Another factor: big tech and non-financial companies could become acquirers of fintechs. Companies like Apple, Google, and Amazon have shown interest in financial services (Apple launched a credit card and buy-now-pay-later; Google has payments; Amazon offers loans to merchants). Rather than building everything from scratch, it’s quite possible they might acquire fintech companies to accelerate their finance-related offerings. For example, if a big tech wanted to get into banking services, buying an established fintech or even a small bank could be an entry strategy. Such moves would blur industry lines but are conceivable given how embedded finance is becoming in other industries.

In sum, financial technology remains one of the most dynamic areas for dealmaking. The sector’s 2021 hype has given way to a more pragmatic phase where the strongest fintechs will either scale up via mergers or be absorbed by larger entities, and weaker ones will be left behind. From a founder’s perspective (as we’ll discuss next), it means opportunities to sell or partner are plentiful if you have a compelling product – but expectations on price have been reset to more realistic levels. For incumbents and investors, fintech M&A is a key avenue to ensure you’re part of the digital finance future rather than disrupted by it.

Outlook and Advice for Founders (2025–2026)

If you are a founder or owner of a financial services company (be it a fintech startup, a niche financial firm, or a boutique in banking/wealth/insurance), the current M&A climate offers both opportunities and challenges. The market is on the upswing, but buyers are selective and diligent. Below, we summarize the outlook for the next 12–18 months and offer tips for those considering a sale or strategic partnership:

• Market Outlook – A Window of Opportunity: The remainder of 2025 and into 2026 is shaping up to be a favorable period for M&A in financial services. Industry experts predict an ongoing rebound in deal activity, building on the momentum from late 2024. Confidence has returned to buyers, and many have publicly stated intentions to pursue acquisitions. Barring any major economic downturn, conditions are stabilizing: interest rates appear to have peaked and may gradually ease (reducing financing costs), and stock valuations in the finance sector have improved from their lows (giving strategic buyers stronger currencies for stock-swap deals). This suggests we are in an “M&A window” where well-prepared sellers can attract interest. The consensus is that 2025 will see a healthy deal flow – potentially a flurry of deals – as legacy companies reposition for growth and as private equity looks to deploy capital. For founders, this means it could be an opportune time to explore a sale or investment: buyers are actively looking, and many have dry powder to spend. Importantly, many buyers who sat on the sidelines during the 2022–23 slowdown are now reactivating their deal pipelines. We are effectively in a recovery upswing of the M&A cycle, which historically is when valuations and demand start rising again.
• Valuations on the Rise (But Mind the Gap): Valuations in financial services M&A have started to recover from the trough of 2022. With more buyers re-entering the market and some high-profile deals setting positive comparables, multiples are trending upward. For instance, fintech and payments companies that in 2022 might have only fetched 4–5× revenue (or struggled to sell at all) are now seeing interest at higher multiples if they have a solid business model. Insurance brokerages and wealth management firms are again commanding strong EBITDA multiples, often at or near pre-2022 highs, especially if they’re in desirable niches. That said, sellers should remain grounded in reality: the frothy valuations of 2021 aren’t fully back (and may not return in the same way). Buyers are still cautious about overpaying, given memories of recent volatility. Companies with strong fundamentals – consistent growth, profitability or a clear path to it, and differentiated offerings – will get premium valuations. Those with patchy performance or higher risk will see more conservative offers. Overall, the trajectory is positive: as one industry report put it, “valuation multiples are expected to expand as economic conditions improve.” If you paused a sale in 2022 due to low bids, you may find that 2025 brings more favorable pricing. Just be prepared to justify your value with data and a credible growth story.
• What Buyers Are Looking For: In the current market, buyers (whether banks, insurers, asset managers, or PE firms) are more selective and diligent. They are typically looking for one of two things (or ideally both): quality and strategic fit. Business quality means solid financial performance – e.g., a fintech with growing revenues and improving unit economics, or a wealth advisory firm with high client retention and strong cash flow. Strategic fit means the acquisition fills a gap or strengthens the buyer’s core business – perhaps adding a new product, technology, customer segment, or geographic presence that the buyer covets. As a seller, you should be prepared to demonstrate a compelling value proposition: Why does your company make the buyer stronger? For example, have you achieved user or revenue growth that outpaces the market? Do you own a niche (say, you’re the top provider of a certain type of insurance in your region, or you built a proprietary AI-driven credit scoring model) that a larger player cannot easily replicate? Also, risk factors will be heavily scrutinized: if you rely on a single key partner or have regulatory issues, expect buyers to factor that into price or deal structure. In recent deals, those companies fetching top-of-range multiples tended to have traits like: multi-year double-digit growth, diversified customer base (no heavy reliance on one or two clients), strong recurring revenue, and unique tech or expertise. Conversely, if your firm has flat or erratic growth, or concentration risk (e.g., one client is 50% of revenue), buyers will either discount the valuation or insist on earn-outs to mitigate that risk. In short, to appeal to buyers, highlight your growth, stability, and uniqueness.
• Hot Segments & Timing Your Move: Consider where your company sits in terms of current industry “hot spots.” In financial services, areas drawing extra buyer interest right now include: FinTech enabling technologies (like API platforms, AI-driven analytics, regtech solutions), payments and embedded finance (everyone wants a piece of the booming digital payments pie, including integrated payments in software), wealthtech and alternative investments (firms that cater to the growing demand for alternative assets or digital wealth management are sought after), and specialty insurance lines (e.g., cyber insurance, pet insurance, etc., which are high-growth). If your company aligns with one of these high-growth areas, make that a centerpiece of your pitch – buyers likely have mandates to invest there. Similarly, if you serve an attractive customer segment – for instance, Millennial and Gen-Z customers via a slick fintech app, or a high-growth emerging market in lending – emphasize that. It can sometimes pay to time your sale when your segment is in the spotlight. For example, if there is surging interest in AI-driven finance solutions in 2025 (as there is, given the AI wave), a fintech founder with a strong AI component might see heightened acquisition interest and valuations. On the flip side, if your segment is temporarily out of favor or facing headwinds (say, mortgage lending during high interest rates), you might consider waiting until conditions improve or position your story around how you’ve adapted and are resilient.
• Prepare Diligently – Financials, Compliance, and Tech: In a more cautious M&A environment, preparation is paramount. Smart buyers will conduct exhaustive due diligence. As a seller, you should get your house in order before going to market. This includes up-to-date, clean financial statements (ideally audited or at least reviewed by a reputable firm), detailed KPIs and cohort data (for fintech or subscription businesses, metrics like customer acquisition cost, lifetime value, churn rates, etc., will be scrutinized), and clear documentation of contracts and obligations. Because this is financial services, regulatory compliance can make or break a deal – be prepared to show that you are in good standing with regulators, have no major legal exposures, and follow required protocols (e.g., KYC/AML policies if applicable, data privacy measures, etc.). Cybersecurity and data integrity are also big concerns: demonstrate that your IT systems are secure and you haven’t had breaches, or if you did, how you addressed them. If your company experienced any irregularities (like a spike in loan losses in a fintech lender, or a one-time revenue boost that isn’t recurring), be ready to explain them transparently. Essentially, anticipate the tough questions and have answers and documentation ready. It can be very helpful to conduct a “sell-side due diligence” or quality of earnings review before engaging with buyers – this way you can fix any issues or at least know where the red flags might be and address them proactively. Showing that you have meticulous records and controls will build buyer confidence and speed up the process.
• Leverage Advisors and Run a Good Process: Engaging an experienced M&A advisor (investment banker or M&A consultant) can significantly improve your outcome – and this isn’t just self-serving advice because this report comes from an advisory firm; it’s borne out by data. In the financial services sector, deals often involve tricky regulatory approvals and complex valuation questions (e.g., how to value a fintech’s user base or an insurance agency’s renewal book). A good advisor will help you identify the right buyers (strategic vs. financial, domestic vs. international), position your company’s story effectively, and create competitive tension to maximize price. Statistics show that competitive processes with multiple bidders tend to yield higher valuations than one-off negotiations. Advisors also help navigate structuring issues unique to this industry – for instance, regulatory “change of control” filings, handling of customer transition, earn-out structuring (common in fintech or advisory deals), etc. Many of the most successful exits in fintech/financial services had advisor guidance behind the scenes, ensuring no money was left on the table. Moreover, an advisor can act as a buffer in negotiations, allowing you to maintain a positive relationship with the eventual buyer (important if you’ll continue with the company post-sale). Given that buyers in this sector can be very sophisticated (large banks or PE firms who do acquisitions regularly), having your own expert on side helps level the playing field. The takeaway: Don’t go it alone unless you have deep M&A experience; a well-run sale process can add substantial value.
• Deal Structure – Be Open and Creative: Price is important, but how you get that price is equally important. In financial services deals, it’s common to see various deal structures to bridge valuation gaps or manage risk – earn-outs, stock consideration, seller financing, retention bonuses, etc. For example, in fintech acquisitions, a buyer might be wary of paying full price upfront if the company’s future performance is uncertain. An earn-out (additional payments tied to hitting revenue or user milestones post-acquisition) can align interests: you ultimately get the full value if your platform succeeds under the new owner, while the buyer feels protected if growth doesn’t materialize. Be prepared for this and think through what metrics would be fair for an earn-out. Similarly, consider whether you are willing to take part of the payment in the buyer’s stock (common if a bank or larger company is acquiring you). If you believe in the combined entity’s prospects, stock can provide upside (and sometimes a tax deferral), though you take on market risk. For founders of regulated entities like banks or investment advisers, note that regulators might require escrows or holdbacks for potential liabilities – this is another deal structuring aspect to negotiate (how much of the price is held in escrow for a period to cover, say, any unforeseen legal/regulatory costs). An advisor and a good attorney will help ensure the structure is standard and fair. The key mindset is flexibility: being rigid on wanting 100% cash upfront at a sky-high price might chase away otherwise great buyers, whereas a bit of creativity can result in a win-win deal that ultimately pays you even more (if you’re confident in your business’s trajectory).
• Your Role Going Forward: Think about what role, if any, you want after the acquisition – and be honest with yourself because buyers will ask. Many acquirers in financial services (especially PE firms or roll-ups) prefer the founders and key executives to stay on for a period to continue leading the business or to ensure client retention. In fact, your willingness to stay can sometimes influence valuation – a buyer may pay a premium knowing the business will keep running under your successful leadership versus if you intend to leave and they must find a new team. If you’re open to staying for 1–3 years to transition, highlight that; it makes your company a more attractive target. Conversely, if your goal is a quick exit or retirement, you might accept a slightly lower price or more upfront cash in exchange for walking away sooner. Communicate your preferences early and negotiate your employment or consulting agreement as part of the deal. Many deals in sectors like investment advisory and insurance include incentive structures for founders to remain (like equity rollovers, performance bonuses, or simply contractual employment for a term). From the buyer’s perspective, having the founder and team on board can de-risk the integration – clients and employees see continuity – so use that as a bargaining chip. But also know your limits: it’s better to be clear if you truly want to step away, so the buyer can plan accordingly (perhaps bringing in new management) rather than springing it as a surprise later.
• Identify Likely Buyers and Tailor Your Approach: Finally, do your homework on who the best buyers are for your firm and put yourself in their shoes. The universe of potential acquirers in financial services is diverse – it could be a larger competitor, a company in an adjacent segment looking to expand, a private equity fund (or one of their portfolio companies), or even a fintech from another country wanting a foothold in the U.S. Each type of buyer will value your business differently. For example, a large strategic buyer might pay more because they see huge synergies (maybe your tech plugged into their distribution could 10x your user base). A PE buyer might be more valuation-disciplined but can offer speed and certainty (and sometimes allow you to roll over equity for a “second bite at the apple”). If you’re a payments startup, obvious buyers include major payments companies (Visa, Mastercard, PayPal, etc.), big banks expanding their merchant services, or fintech aggregators backed by PE. If you run a boutique wealth advisory, buyers could be large banks with wealth divisions, big RIAs consolidators, or even a roll-up backed by private equity. Create a target list and understand each buyer’s strategy. If, for instance, a particular bank is weak in the area your product serves (maybe a bank that lacks a good mobile app and you’ve built one), that bank should be high on your outreach list as they may pay a strategic premium. In negotiations, leverage the fact that others are interested – never let one buyer think they’re the only game in town. Highlight aspects of your business that match the specific buyer’s needs (tailor your story: the same company might pitch its robust compliance processes to a bank buyer, but emphasize its high growth and tech platform to a tech company buyer). Showing that you understand how you fit into their puzzle will make it easier for them to say “yes” and see the acquisition as accretive. The current trend across all FS sectors is buyers looking for the “missing piece” that can accelerate their strategy – position your firm as that piece.

In conclusion, the financial services M&A market is experiencing a renaissance. The past few years of challenges have given way to a period of strategic opportunity. For founders and owners, this means there is likely a receptive audience for your company’s story if you decide to explore a sale or merger. By understanding the market dynamics, getting prepared, and approaching the process strategically (and with the right advice), you can capitalize on the favorable conditions. Whether your goal is to join forces with a larger platform to scale your vision, or to secure an exit and liquidity after years of hard work, the keys to success will be preparation, flexibility, and alignment with the right partner. The deals being struck now are shaping the future landscape of finance – and with the right approach, your company could be part of that next chapter, on advantageous terms that reward the value you’ve built.

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Sources: This report’s analysis is based on a wide range of industry data, deal databases, and expert commentary from 2024 and early 2025. We drew on insights from major consulting firms’ M&A reports (which track deal value and strategic trends in financial services), investment banking updates on sector activity, and news of notable transactions. Key references include Bain & Company’s 2025 outlook on financial services M&A (highlighting how technology and regulation are spurring deals), McKinsey’s February 2025 analysis of financial-services deal trends, and PwC and KPMG’s mid-2025 M&A trend reports which provided data on deal volumes and subsector patterns. Additionally, specialized industry sources – for example, Capstone Partners’ FinTech M&A update (June 2025) – offered granular data on fintech deal volume and valuations. These sources, along with various deal announcements and financial news coverage (e.g., of the Capital One–Discover merger and other headline transactions), form the factual basis for the trends and recommendations discussed. The resources listed below can be consulted for further detail and corroboration of the points made in this report.

Resources:

• Bain & Company – M&A in Financial Services: Coming Back to Life (2025). An in-depth report on 2024 financial services deal activity and 2025 outlook, covering banking, insurance, payments, and wealth sectors.
• McKinsey & Co. – Financial Services: Dealmakers Adapt to a Shifting Landscape (Feb 2025). Article analyzing how financial services M&A recovered in 2024 and trends by subsector, with emphasis on domestic deals and opportunities in 2025.
• PwC – Global M&A Trends in Financial Services: 2025 Mid-Year Outlook. A mid-2025 update highlighting financial services deal volumes/values, regional trends, and the rise of megadeals and private credit’s role in financing.
• KPMG – Q2 2025 Financial Services M&A Trends Report. Quarterly report (Aug 2025) detailing financial services M&A statistics in the U.S., top deals of the quarter, and commentary on regulatory easing and subsector performance.
• Capstone Partners – Financial Technology M&A Update (June 2025). Investment banking insight into FinTech and payments M&A, including deal count, notable transactions, and the impact of U.S. regulatory shifts on fintech consolidation.
• Legacy Advisors – 2025 Healthcare & Life Sciences M&A Industry Report. (Related industry report for comparison) Analysis of M&A trends in healthcare, illustrating how technological innovation and regulatory changes drive consolidation in another top M&A sector.
• Legacy Advisors – 2022–2025 U.S. Digital Marketing & Advertising M&A Report. (Related industry report) Examination of a different sector’s M&A cycle, useful for understanding broader market factors (like interest rate impacts on deal activity) that also affect financial services.
• Legacy Advisors – Technology M&A Report: Trends, Drivers, and Outlook for Tech Founders (2025). (Related industry report) Overview of tech sector M&A, highlighting the dominance of tech deals and the role of rapid innovation – provides context for the competitive landscape as financial services firms also acquire tech companies to transform their businesses.