December 1 2025 | Deals | Due diligence | M&A Advisors
The financial services sector in Australia is facing significant challenges, as evidenced by a 20% decline in deal volume over the past year, according to our 2025 Australia and New Zealand Deal Indicators Report.
This downturn is compounded by a 10% drop in the most recent quarter, reflecting a cautious sentiment among investors amid economic uncertainty. While some sectors, such as communications services, have experienced explosive growth of 400% recently, financials are struggling to maintain momentum.
Despite these challenges, there are signs of resilience within the sector. The financial services industry has seen a 33% growth in deal volumes when comparing the latest quarter to the same period last year. So, while the overall trend is negative, there are pockets of activity that could signal a potential recovery.
More activity in the mid-market
In line with the financial services sector, other industries like healthcare and consumer discretionary have also experienced a very muted deal market, albeit at varying rates. The healthcare sector, for instance, has seen a 15% drop in deal volumes over the past year, while consumer discretionary has managed a modest 6% increase. These sectors face quite distinct headwinds. For financial services, falling interest rates and an increasingly fragmented banking sector are playing out in the lack of significant transactions being done in this market, especially at the top end of town.
This is less of an issue for mid-market firms, where there is more activity as businesses consolidate to generate scale. All businesses in the banking and financial services sector are grappling with the realities of artificial intelligence (AI). It’s understood organisations are at varying stages of readiness for the AI onslaught, with most at least piloting different AI techs from chat bots to more sophisticated data management systems.
As the Australian economy grapples with persistently high inflation, the financial services sector's ability to rebound will depend on its capacity to innovate and respond to emerging market demands. Investors are likely to remain cautious, but the potential for strategic growth remains, particularly as firms reassess their portfolios and seek to capitalise on new opportunities in a rapidly evolving landscape.
Consolidation the key
In the FY25 period, a prominent transaction has been the pending $2.1 billion acquisition of Insignia Financial by CC Capital Partners, highlighting the focus on consolidation among investment managers and a growing demand among clients for comprehensive financial services.
Additionally, the completed $935 million acquisition of fleet management firm SG Fleet Group by Pacific Equity Partners is a reflection of the desire to enhance efficiencies and expand service offerings in finance leasing. Another significant transaction is the pending $545 million investment in financial services business Challenger by Daiichi Life Holdings , emphasising the increasing interest in life insurance and investment management.
These transactions illustrate a broader trend towards consolidation in financial services and a desire by local and international players to expand market presence in key financial sectors.
