The Evolution of Private Equity in Financial Services

Transformative Capital Deployment & Strategic Shifts (2010-2025)

I was asked several times yesterday whilst in London, on the changing trends of Private Equity (PE) in financial services since the financial crisis, and pulled a few thoughts together, travelling back on the train. (as you do!)

Private equity's approach to financial services investments has evolved dramatically over the past 15 years, transforming from opportunistic capital deployment to sophisticated operational value creation; market forces, regulatory environments, and competitive dynamics have shaped PE strategy across distinct market cycles.

Post-Financial Crisis (2010-2014)

The post-GFC era witnessed savvy PE firms deploying countercyclical capital into financial services, recognising regulatory pressures would force incumbents to divest valuable franchises at compelling valuations. This period laid the foundation for subsequent value creation through operational improvements rather than mere financial engineering.

Key Trends

Regulatory-driven divestiture of non-core banking assets created unique PE opportunities

PE firms emerged as key players in recapitalizing distressed financial institutions with 5-7x EBITDA multiples

Risk-averse financing structures with 40-50% equity contributions as debt markets recovered

Strategic consolidation in asset management targeting scale efficiencies and regulatory arbitrage

Notable Deals

Guggenheim Partners' transformative acquisition of Security Benefit Corp (2010) exemplified opportunistic post-crisis investment in undervalued insurance assets

Lloyds Banking Group's strategic divestiture of Esure for £185M (2010) as part of mandated EU state-aid conditions, yielding 8.7x return upon Esure's subsequent IPO

PE-backed acquisitions of 23 FDIC-failed banks (2010-2012) showcasing private capital's stabilizing influence in regional banking consolidation

Growth Period (2015-2019)

This era marked financial services PE's strategic pivot toward technology-enablement and platform plays. Sponsors increasingly sought businesses with embedded SaaS components commanding significantly higher exit multiples, justifying premium entry prices through vision for technology-driven transformation. The competitive intensity between strategic acquirers and PE firms with sector expertise drove unprecedented valuation levels.

Key Trends

Valuation multiples expanded dramatically from 9x to 12x+ EBITDA, driven by competition for quality assets and abundant dry powder

Strategic pivot toward technology-enabled financial services platforms with 30-40% higher margins than traditional models

Increased leverage tolerance with debt/EBITDA ratios reaching 6-7x as covenant-lite structures predominated

Emergence of specialised financial services PE platforms with verticalised expertise in payments, wealth tech, and alternative lending

Notable Deals

Blackstone/Corsair's landmark $4B acquisition of First Eagle (2015) demonstrated premium valuations (11.8x EBITDA) for sticky, high-margin asset managers with recurring revenue

Blackstone's forward-looking $4.8B acquisition of Aon Technology (2016) validated the growing convergence of HR tech and financial services platforms

Carlyle's strategic acquisition of PA Consulting (2015) signalled PE's recognition of digital transformation consulting as a high-growth financial services adjacency

Pandemic Era (2020-2023)

The pandemic era witnessed extreme market bifurcation - initially characterised by unprecedented deal velocity and easy financing, followed by rapid monetary tightening that challenged traditional PE models. This volatile period accelerated structural shifts in the financial services landscape, particularly the institutionalization of private credit as both a financing source and investment target, creating a self-reinforcing ecosystem that fundamentally altered PE's approach to financial services investing.

Key Trends

Unprecedented liquidity fuelled record-breaking PE transaction volumes reaching $2.2T in 2021, with financial services capturing 19% market share

Club deals and consortium approaches resurfaced for mega-transactions, allowing PE firms to deploy capital efficiently while diversifying concentration risk

Private credit emerged as a dominant financing channel with $387B of deployment in 2022 alone, fundamentally reshaping the leverage market landscape

Dramatic market reversal as monetary tightening cycle began in 2022, with financial services deal volume declining 43% in back half of 2022-2023

Notable Deals

KKR's bold $36.7B bid for Telecom Italia (2021) represented the largest financial services infrastructure play of the decade, reflecting the strategic convergence of telecommunications and financial services

Four-way consortium acquisition of Medline by Hellman & Friedman, GIC, Blackstone & Carlyle (2021) signalled the return of mega-cap club deals to mitigate concentration risk

Advent & BCI's acquisition of Maxar Technologies (2023) with a $2.3B direct lender financing package demonstrated private credit's capacity to facilitate complex transactions amid traditional capital market dislocation

Current Landscape (2024-2025)

The contemporary landscape reveals PE's evolution into a more sophisticated financial services investor, with alpha-generation increasingly driven by operational transformation and strategic repositioning rather than financial engineering.

PE firms themselves have become targets of consolidation as the industry matures, while simultaneously pursuing geographic and subsector expansion strategies. The emerging era is characterized by creative capital formation approaches that blur traditional boundaries between financial sponsors, strategics and infrastructure investors – pointing toward an increasingly institutionalized role for PE in reshaping global financial services architecture.

Key Trends

Strategic rebound in global PE deal value (up 23% to $1.7T in 2024) driven by anticipated monetary easing and declining seller-buyer valuation gap

Unprecedented consolidation among PE firms themselves, with 37 notable transactions as industry maturity drives search for scale economies and AUM diversification

Fundamental shift from financial engineering to operational alpha, with portfolio company EBITDA expansion accounting for 61% of returns vs. 29% from multiple expansion

Deployment of record $2.1T dry powder with more intentional capital allocation strategies across geographies and subsectors

Geographic diversification initiatives evidenced by Japanese financial services transactions comprising 5% of global PE volume, up from 2% in 2022

Notable Deals

NB Private Equity Partners, CPPIB & EQT's transformative €13.3B acquisition of Nord Anglia Education (2024) exemplified cross-border education finance platform deals targeting tuition cash flow securitization

Apollo Global Management's innovative €10.1B joint venture structure with Intel's Fab 34 facility (2024) demonstrated creative application of PE capital to technology infrastructure financing

Barclays' strategic partnership with Brookfield Asset Management (2025) for payment acceptance business redefined bank/PE collaboration models focused on operational transformation rather than full divestiture

As we look ahead, PE's role in shaping the financial services landscape will continue to evolve.

Consolidation within PE itself, increasingly specialised sector expertise, and blending of financial and strategic acquirer approaches suggest the emergence of a new paradigm where private capital is the primary architect of financial innovation and infrastructure development.