Our industry focus

Wealth Management & Private Banking

The private banking and wealth management market has been under pressure for several years now. Regulatory scrutiny, the global fight for tax transparency, the challenging macro economic environment and the digitalisation are fundamentally changing the landscape for private banks and independent wealth managers. Whilst the client assets held by banks in Switzerland have recovered to pre-financial-crisis levels, the market (still) is in a consolidating movement. We currently see the following M&A trends:

• Banks are still reviewing their offshore-market portfolios, aiming at focusing on selected core markets going forward, whilst selling or referring non-core books to better suited competitors.
• After various market exits there are still further foreign banking groups who review and challenge their Swiss private banking presence, and may decide to sell, whilst others have made a clear statement to stay and actively participate in the market consolidation.
• Larger Swiss players act as the main acquirers and consolidators are building up scale and international reach.
• Small private banks tend to defend niche, grow or merge/exit.
• Currently hesitant look of large players at opportunities overseas due to challenging market conditions in the home market.
• Slow consolidation within the independent asset manager's market, predominantly driven by the resolution of business successions.

Asset & Fund Management

The institutional asset and fund management market has become highly competitive. Ever growing regulatory scrutiny, the convergence of traditional and alternative asset managers, increasing fee pressure and further growing power of distributors are challenging the operating models and offerings of asset managers. The resulting trend to large ETF and index fund platforms, however, also creates opportunities for players that can – sustainably – outperform the market. We currently see the following main M&A trends:

• The Swiss asset management market is dominated by larger banks.
• Insurance companies build up their third party asset management businesses in order to diversify their revenue streams.
• A large number of smaller niche-players with focused specialised offerings face the challenge to offering the right product in a cyclical and changing market environment.
• International fund houses and asset managers see Switzerland as an important sales hub and therefore invest into their teams on the ground.
• Still, M&A activity in that sub-industry has been limited with occasional competence-driven bolt-on acquisitions abroad and selected deals within Switzerland.

Retail & Commercial Banking

The Swiss retail and commercial banking market is very fragmented. However, it is dominated by a couple of countrywide or regionally active players, such as the two big universal banks, the Raiffeisen group, the larger cantonal banks, but also PostFinance. Despite various attempts to diversify their revenue streams into commission-earning service models, most retail banks are still heavily dependent on the interest margin business. The product and service offerings are very similar whilst differentiating strategies are rather rare. The onshore business has seen very robust financial metrics over the last years, despite negative interest rates. We currently see the following main M&A trends:

• Hardly any M&A activities, except for occasional portfolio alignments, i.e. disposals of private banking subsidiaries or add-on acquisitions in the asset management and, lately, in the fintech space.
• The impact of digitalisation, the market entry of new, differentiating players or a sharp rise in the interest rates might trigger a consolidation in this very fragmented market.
• Balance sheet management, the alignment of on-site and virtual client service models as well as the search for further diversification of revenue streams are the main points on the managements’ agendas.

Insurance

The insurance sector is an important pillar of the Swiss financial services market. Whilst there are still more than 200 supervised insurance companies in the country, the concentration in the sub-sectors is quite high, in particular in the life insurance space, where the largest five players represent more than 80% of the booked gross premiums. The whole market is stagnant and competition is steadily increasing. Growing regulation and solvency requirements further increase the insurers cost base. On the other hand, new competition from insurtechs and potential new entrants from other industries as well as the (current) negative interest environment put additional pressure on income and premiums. We currently see the following main M&A trends:

• Attempt to diversify income streams by building up – organically and by means of acquisitions - asset management and other fee-earning business models, i.e. outsourcing and other services.
• Flirting with and occasional investments into insurtechs and/or other fintech companies to enhance own competence in digital business models.
• Review of international footprint and portfolios of larger players.
• Slow consolidation in the health insurance market.

Fintech

Switzerland has a leading and diverse fintech and insurtech market, including promising companies in the areas of online wealth management, personal finance, blockchain, mobile payments, crowdlending and -funding as well as insurtech. The market is predominantly represented by start-up companies but also by larger entities that already started their business a couple of years ago. The young businesses grow within and profit from a healthy and evolving ecosystem in one of the richest countries world-wide featuring a long tradition of global financial services. We currently see the following main M&A trends:

• An evolving regulatory framework may also result in higher costs of doing business for fintech companies, challenging their business model on a standalone basis.
• Shy but growing convergence of «traditional» financial services providers and fintech companies.
• Cooperations and occasional investments by «traditional» players into fintech businesses.
• Ongoing fundraisings or VC/PE investments in later stages.
• Occasional expansions into the neighbouring countries in order to expand into larger markets.

Private Equity

Private equity (“PE”) is an established industry sector within financial services, pursuing its own strategic objectives while also playing a key role in the development of other financial sub-sectors, as well as non-financial industries. Private market managers have enjoyed robust growth fueled by different factors, including reduced risk appetite amongst banks and investors’ search for yield in a prolonged cycle of low interest rates in the public / liquid markets. M&A is central to the business model of PE, as investment portfolios are built and realized over time, and PE-owned portfolio companies themselves often pursue buy & build strategies of their own. Consolidation is ongoing both at the parent level among PE firms, and at the level of their respective portfolio companies:

• Consolidation amongst GPs / PE firms as they seek to gain AuM scale or broaden geographical footprint, and / or seek operational efficiencies
• Diversification into other asset classes, expanding the product range either organically or by acquisition (e.g., into private credit, real estate, and/or infrastructure), thereby evolving from dedicated PE firms into more broadly based alternative asset managers
• PE traditionally plays a key role in the development of early-stage financial innovators (e.g., FinTech / InsurTech), as well as distressed or turnaround situations amongst established financial institutions (e.g., bailouts / restructurings during market crises)
• Whether within or outside the financial sector, the quest for attractive returns as expected by their investor base tends to direct the engagement of PE toward either the high-growth (e.g., Tech-enabled) segments of any industry, and / or restructuring opportunities with commensurate operational and financial upside

Other Financial Services Sub-Sectors

Apart from the large banking and insurance sub-sectors, there are plenty of smaller financial services lines, including consumer finance and leasing, fiduciary and trust, IT and process services providers and insourcers, debt structurers and collectors etc. All these sub-sectors have their own market structures and are subject to challenging changes, predominantly driven by technology and digitalisation, and partially by legislation and regulation.