Ed Herlihy, Richard Kim, and Nick Demmo are Partners at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton memorandum by Mr. Herlihy, Mr. Kim, Mr. Demmo, Matt Guest, Mark Veblen, and Brandon Price.
I. BEGINNING OF A RESURGENCE SETS THE STAGE FOR A MORE ROBUST M&A MARKET IN 2025
Financial institutions M&A in 2024 was constrained by a challenging regulatory environment and continued fallout from high interest rates, but there were notable signs of an emerging resurgence of M&A during the year and well-founded reasons for an optimistic outlook. The interest rate cuts by the Federal Reserve in the second half of the year and the change in presidential administration have spurred hopes for an improving economic environment and significant change in regulatory policy and personnel. Financial institutions M&A was led by Capital One’s $35.3 billion acquisition of Discover, which was one of the largest announced M&A transactions globally across industries and the largest announced bank M&A transaction in the United States since the financial crisis. The transaction is distinctive in combining elements of a fintech payments transaction and bank acquisition. Even excluding the Capital One/Discover transaction, U.S. bank deals with an aggregate deal value of $16.3 billion were announced in 2024, surpassing transaction volumes for 2023 and 2022 combined. There was also rich activity in the asset management, fintech and insurance brokerage sectors. However, as with deal activity generally across industries, the M&A activity in the financial services sector continued to trail M&A levels that preceded the Biden Administration.
