Hot topics in financial services M&A Hot topics in financial services M&A

M&A and material partnerships in the financial services sector have remained a bright industry spot over the last few years, with significantly increased activity and fanfare. In the first half of 2025, there were 1,125 announced global financial services sector deals, an increase from 1,106 in the first half of 2024. A record 2,222 deals were announced in that year. According to the KPMG M&A Trends Report, deal values surged in the second quarter of 2025, up 22% from the prior quarter and more than 50% from the prior year. This was driven by M&A in specialty insurance, payments and capital markets platforms.

Over the last several years, the market has attracted strong interest from strategic financial institution (FI) buyers. At the same time, there has been significant growth in interest from private equity purchasers and asset managers seeking quick growth with the attractive, annuity-like returns that financial services can provide. Given the strength of the fourth quarter in 2025 and overall interest in financial services, we anticipate 2026 will remain strong for activity in this space.

The FI M&A market strengthens

The year started slowly with general choppiness in the M&A market, as discussed in our Osler Legal Outlook M&A article, as we were introduced to and began to digest the macro trade issues and environment. However, activity in the second and third quarters was strong and the pace is rapidly accelerating as we approach year end. In Canada alone, several notable marquee transactions were completed or announced in 2025. These included BMO’s acquisition of Burgundy Asset Management and Kelso’s acquisition of a material interest in wealth and asset manager, Wellington-Altus. Scotiabank sold banks in Colombia, Costa Rica and Panama to Davivienda Bank and Desjardins acquired Guardian Capital. Osler was lead counsel on three of these deals.

Globally, deal size continued to be robust in 2025. For example, the Global Payments Inc. acquisition of Worldpay at $24.3 billion highlights growth in payment platform transactions. Similarly, Fidelity National Information Services, Inc.’s acquisition of the Issuer Solutions business of Global Payments Inc. at $13.4 billion represented another significant payment-related transaction.

Looking forward to 2026, we expect continued growth in the financial services sector, which we believe will be reflected in a number of key trends.

Wealth, wealth and more wealth: here comes private equity!

Wealth and asset management M&A is booming. Gone are the days when buyers of wealth and asset management businesses were limited only to financial institutions. In the second quarter of 2025, private equity made up almost 20% of all financial services deals.

The largest sub-class in financial services M&A deal volume continues to be wealth and asset management and payments. Private wealth has presented a significant opportunity and area of focus for private equity investment. With so much private capital available and so much growth and interest in private wealth, it is unsurprising that this has been a key driver for growth in financial services M&A and that it is likely to remain a growth area for 2026.

In the face of interest rate instability and search for long-term and increasing revenues, wealth and asset management have become darlings. As the space is very fragmented, we expect it to continue to be busy with star assets being traded at handsome multiples.

Consolidation continues

In the banking, insurance, and wealth and asset management sector, the pace of consolidation has been relentless and is expected to continue. High-profile transactions in these sectors include National Bank’s takeover of Canadian Western Bank, the sale of Travelers’ property and casualty insurance business to Definity Financial and BMO’s acquisition of Burgundy, respectively.

Scale has become a key advantage. Many businesses in financial services have economies of scale after their key fixed cost structures are covered. For strategic buyers or private equity platforms, this has meant increased competition in auctions and a race to growth. Market fragility and volatility, certain pockets of borrower distress and rate fluctuations can also provide a good setting for roll-up M&A activity and consolidation at attractive valuations.

Hot stock market impact: mega deals and share consideration

With certain limited exceptions, the stock markets have continued their burning hot pace of new record highs through 2025. Financial services valuations on both sides of the Canada-U.S. border have been strong. This has provided public banks, insurance companies, payments providers, publicly listed private equity and asset managers with exceptional “paper currency” to pay for acquisitions in whole or in part. The result is an uptick in mega-deals. Thirty-five deals with a value over $1 billion accounted for 83% of transaction value in the first half of 2025.

This has been coupled with a significant expansion in the use of share consideration as a component of overall consideration. Significant amounts of share consideration were used by National Bank to pay for its acquisition of Canadian Western Bank. Likewise, BMO relied heavily on share consideration for its Burgundy acquisition and Definity issued significant equity capital to fund its acquisition of Travelers’ Canadian property and casualty business.

As public markets remain frothy and valuations high, we expect buyers will continue to consider stock issuances as part of their acquisitions. With high valuations and room still for further growth, we also anticipate that more sellers will be willing to accept the same as consideration, particularly in wealth management.

Payments

As noted, the two largest global financial services transactions in the second quarter of 2025 were transactions in the payments space. With the Retail Payment Activities Act (RPAA) now fully in force as of September 2025, we can expect to see further consolidation in the Canadian payments sector. Over 1,600 payment service providers (PSPs) have applied for registration or are now registered with the Bank of Canada. This is a significant number, given the size of the Canadian market. Smaller PSPs may prefer to exit the space, by way of sale or otherwise, given the increased regulatory burden and competitive landscape. Alternatively, they may themselves seek to grow through acquisitions to bolster their capabilities.

The acquisition of a one-third voting interest in a PSP will constitute a change of control. This will trigger a requirement to make a new application to the Bank of Canada. Prospective investors and acquirers of a PSP will need to factor approval timelines into any acquisition plans.

Acquisition activity could be accelerated once access to the Real-Time Rail is available to registered PSPs. As discussed in our Osler Update, Real-Time Rail participants will be expected to meet robust security and other operational requirements. It is likely that only players with sufficient scale will ultimately be approved.

The digital asset space is also maturing. As digital coins grow in adoption and use, regulators, FIs and private equity are becoming increasingly involved in these assets. In the payments space in particular, increased use of stablecoins to facilitate global payment will likely generate increased M&A and strategic partnerships. We discuss this further in our Osler Legal Outlook article.

Financial services sector appears primed for growth

These trends suggest that financial services is a sector of the Canadian and global markets that warrants keen attention. Generally stable, with strong capital positions and high customer demand, financial services businesses are primed for continued interest from strategics and private equity, and likely to continue to generate robust M&A activity in the sector. However, financial services businesses need to be prepared for some of the unique considerations associated with transacting in a regulated industry.