M&A trends in financial services

Despite a turbulent start, Q2’25 marked a decisive shift in M&A sentiment across the financial services sector. Regulatory easing and strategic imperatives brought dealmakers back with renewed conviction. The start of regulatory easing and perceived sentiment for a streamlined, speedier approval process started to bring dealmakers back with renewed conviction. The green shoots are promising, and as we move through the rest of 2025 we expect an uptick in the number of announced deals.

Private equity (PE) firms are poised to impact the insurance M&A landscape, with approximately $500 billion in dry powder and favorable financing conditions. They face pressure to deploy capital, fueling strategic acquisitions aimed at stable revenue streams amid market volatility. The Ryan Specialty's acquisition of Velocity Risk Underwriters showcases the strategic value of specialty distribution and technology-enabled platforms integrating AI and big data analytics.

Insurance brokers dominate deal activity, maintaining the largest portion of deal volume across quarters even as overall transaction volumes have declined. Strategic transactions significantly outweigh financial buyer activity, indicating consolidation driven primarily by acquirers seeking synergies and market expansion rather than financial engineering.

Deal value surged—up 22 percent QoQ and 50.7 percent YoY—propelled by large-scale strategic transactions in banking and insurance.^{1 2} Primary reasons driving these transactions include the desire to increase geographic reach, acquire new technology, products, skills, or lines of business, and address cost or revenue pressures. Additionally, institutions seek to scale and improve efficiency ratios or revenues. While trends in consumer credit and lending standards, such as increased credit card usage, reflect broader economic pressures like cost-of-living crises and rising tariffs, these factors alone are less likely to directly prompt M&A activity. Instead, they underscore the need for banks and insurers to innovate and adapt to evolving consumer behaviors within a competitive landscape.

Overall consumer credit grew steadily at 0.10 percent MoM, indicating stable revenue streams appealing to strategic buyers, but reflects potential risks as families relying on credit face wage growth challenges. The 0.27 percent decline in revolving credit emphasizes caution among consumers, prompting institutions to diversify offerings and influence mergers aimed at growth.

Deal volume dipped slightly, but the quality and strategic intent of deals improved, signaling a shift toward scale, specialization, and geographic expansion. Banking M&A saw heightened interest, particularly among regional players and payment solutions providers. Insurance firms advanced specialty lines and brokerage consolidation, while capital markets players pursued RIAs and crypto platforms to diversify and build scale.³ Easing interest rates, a supportive regulatory tone, and resolution of political uncertainties provided fertile ground for dealmaking, even amid inflation and trade policy concerns.

Standout transactions, like Global Payments’ acquisition of Worldpay and Brown & Brown’s acquisition of RSC Topco, highlight the pivot toward platform integration, client acquisition, and operational scale. The sector appears poised for continued momentum, albeit cautiously due to macroeconomic volatility and execution risks.

We are cautiously optimistic that deal activity in Q2’25 is signaling that the M&A engine for the financial services sector is warming up. Deal value is surging and strategic intent is sharpening, and regulatory clarity and easing interest rates have created a conducive backdrop for dealmaking. That said, inflationary pressures, trade policy uncertainty, and geopolitical risks remain potential headwinds.

As we look ahead to Q3’25, private equity firms are under increasing pressure to deploy their substantial capital reserves, which may lead to more activity in the insurance sector. A focus on technology-enabled platforms and specialty distribution highlights strategic investment priorities. Acquirers are confident in niche market positioning and catastrophe-exposed property coverage capabilities, shaping investment behaviors that reflect confidence in advanced underwriting and risk management expertise, despite challenging market conditions. Insurance deals continue to demonstrate strategic strength, with brokers leading M&A activity, positioning the sector for focused consolidation. There is a clear preference for acquisitions that prioritize synergy and market expansion, emphasizing strategic collaborations over purely financial maneuvers.

As institutions decipher the M&A marketplace, a strategic focus on divesting non-core assets is becoming increasingly significant. This approach allows organizations to concentrate on bolstering profitable segments and advancing their strategic priorities, particularly within sectors like health insurance and equipment finance. By prioritizing cores of excellence, firms can better align their investment dollars with high-impact opportunities, fostering growth in areas most aligned with their overarching business strategies.

Looking ahead to Q3’25, the implications of the One Big Beautiful Bill introduce a new era of regulatory clarity, likely expediting merger approval processes and enabling banks to capitalize on growth opportunities. We anticipate potentially increased deal volume among regional banking players as they pursue scale by expanding into new geographies, lines of business, and client segments. This legislative development is expected to drive strategic consolidation efforts, benefiting insurance M&A, which is expected to remain strong with its focus on specialty coverage and brokerage integration. Capital markets firms will also continue to explore RIAs and alternative investment platforms, encouraged by these regulatory changes, with crypto finance emerging as a strategic frontier.