Financial Institutions M&A Key Trends and Outlook

I. Regulatory Environment Set Stage for Resurgent M&A Activity in 2025 with Bright Outlook for 2026

2025 began with a sense of optimism for a return to a more normalized regulatory environment which — coupled with a continued favorable economic environment — would lay the groundwork for more robust M&A activity for financial institutions. Consistent with our early expectations, the regulatory environment has indeed improved, and there was a spike in M&A activity. Both the regulatory situation and the economy and financial markets remain a work in progress, buffeted by national and global political forces that created periodic volatility and, of late, a sense of uncertainty. Nonetheless, 2025 was a year of major events and progress, with promising early signs for 2026.

Regulatory approval and closing of Capital One’s $51.8 billion acquisition of Discover in May 2025 provided the first real evidence of shifting tides. The transaction closed following a protracted and highly detailed regulatory review process that epitomized the challenges that large M&A transactions had faced over the prior few years. The real watershed moment occurred a month later in June 2025 when Miki Bowman gave her first public speech following her appointment as the Federal Reserve’s Vice Chair for Supervision. Vice Chair Bowman emphasized the need to return to a more pragmatic approach to bank regulation focused on the material risks facing banking institutions. She highlighted two areas that we have previously written created significant headwinds for bank M&A: (1) the ratings mismatch that had resulted in two-thirds of large institutions having unsatisfactory ratings (and thus being in the penalty box for M&A) even though many of these institutions met supervisory expectations for capital and liquidity and (2) the need for the application process to involve transparency and clear and more expedient timelines for action. This speech was well received by the banking industry and helped drive a surge in bank M&A in the second half of the year. The pragmatic approach articulated by Vice Chair Bowman is part of a paradigmatic shift in bank regulation by the Federal Reserve, OCC and FDIC that recognizes that consolidation can result in a stronger, more efficient and more stable banking industry. This new approach resulted in bank regulators rescinding more restrictive policies and practices that had constrained M&A under the prior administration.

The shift in the regulatory environment in 2025 was not limited to bank regulation. In general, the tone and approach of federal regulators, including those at the Federal Trade Commission and the Department of Justice, swung back toward more traditional antitrust analysis and enforcement, including consideration of remedies to address competitive concerns, jettisoning the recently espoused anti-consolidation mindset and some of the more novel antitrust theories advanced by the prior administration. This led to an overall wave of megamergers across industries at levels not seen in recent years, with 23 deals globally worth more than $10 billion, exceeding the prior annual high set a decade earlier. However, a generally more receptive regulatory environment does not mean a free pass for transactions. This year has shown that parties need to carefully consider the political implications for potential transactions with an administration that can be very hands-on in the transaction review process.

The overall outlook for M&A activity in the financial services industry in 2026 remains bright, with the return to a more traditional regulatory environment and review process supporting M&A across financial institution sectors. 2026 is already off to a strong start with Banco Santander’s agreement to acquire Webster Financial for $12.3 billion, the largest regional bank acquisition by value in years and one of the largest ever cross-border acquisitions of a U.S. bank. Other announced transactions include Capital One’s $5.15 billion acquisition of Brex, the AI-powered business payments and expense management platform, and Prosperity Bancshares’ $2 billion acquisition of Stellar Bancorp. Economic conditions across financial services generally remain strong and competitive dynamics and technological innovation are forces that we expect to continue to drive consolidation. However, as we discuss in more detail below, this well-founded optimism, including the improved regulatory environment, should not be overstated and economic and market conditions could change rapidly as the impacts of AI-related disruption or geopolitical events reverberate.

II. Financial Services Sector-by-Sector 2025 Review and 2026 Outlook

A. Banking Organizations

Before looking back at 2025 deal activity, we first discuss the transformational $12.3 billion transaction between Webster Financial and Banco Santander. Santander will acquire Webster, an $80 billion asset regional bank, for a mixture of approximately 65% cash and 35% Santander American Depository Shares. Santander is a $2 trillion asset, G-SIB that is one of the largest banks by market capitalization in the world. This transaction positions Santander to become a top-ten retail and commercial bank with $327 billion in assets in the United States, significantly expanding the scale of its U.S. franchise and its footprint in the Northeast where it will become a top-five deposit franchise. The deal combines Santander’s consumer-finance strengths with Webster’s high-quality commercial and deposit franchise and lower funding profile which Santander views as critical to achieving top-tier profitability in the United States. Webster was able to command a high premium (price to tangible book value of over 200%) due to the quality and size of its franchise. Santander viewed the continued leadership of Webster senior management team in key positions as being critical to a successful transaction. The current Webster CEO, John Ciulla, will be the CEO of the combined Santander U.S. bank and current Webster President and COO, Luis Massiani, will be COO of both the U.S. holding company and the combined U.S. bank. While it is too early to pronounce trends for 2026, notably both the Webster transaction and the $2 billion Prosperity/Stellar transaction employed a mixture of cash and stock, which may become more common given banks’ high capital levels and desire to limit earnings per share dilution.

1. Overview of 2025 Deal Activity

Looking back at 2025, the continuing improvement in the interest rate environment relieved some pressure on bank balance sheets so that unrealized losses in bank securities portfolios are no longer a key investor concern and also helped banks improve their net interest margin. In 2023, unrealized losses were a significant factor in the failures of Silicon Valley Bank and First Republic Bank. In addition to contributing to those failures and providing an overhang on banks generally, these unrealized losses were also an impediment to bank M&A activity given the need to mark assets to market in connection with acquisitions. According to a November 2025 report by the Federal Reserve Bank of St. Louis, the ratio of unrealized losses to total securities held by U.S. banks declined in the second quarter of 2025 by nearly 50% from its peak in the third quarter of 2023. In addition, during the second half of 2025, the Federal Reserve again lowered the benchmark interest rate three times by another 75 basis points, furthering the improvement to bank balance sheets by the end of 2025. The impact of lower interest rates and expectations for further rate cuts, a resilient U.S. economy with better-than-expected GDP growth and generally stable credit quality resulted in improved financial performance at U.S. banks and a surge in market performance in the second half of the year, with the largest banks also significantly benefiting from increased revenues from investment banking and trading. This change in rate environment, combined with asset management activities by many banking institutions and stock price confidence, also helped ameliorate balance sheet losses in bank M&A transactions.

As referenced above, the most significant M&A development in the first half of 2025 was the closing of Capital One’s $51.8 billion acquisition of Discover. The transaction received regulatory approval from the Federal Reserve and OCC in April 2025. Because the transaction was structured so that it was not subject to the Hart-Scott-Rodino Act, the Department of Justice’s role was limited in scope — it advised the Federal Reserve Board that, following a review, it had concluded that the transaction did not warrant an adverse comment. The overall regulatory review period spanned 13 months from filing of the relevant applications until approval, including a change in presidential administration and a variety of new appointments to the key agencies in early 2025. Despite all of the noise, the facts and supporting evidence presented during these regulatory reviews overwhelmingly demonstrated to the satisfaction of the regulators that the transaction was pro-competitive in strengthening the Discover network, would be beneficial for consumers and would enhance the stability of the financial system by addressing the compliance issues present at Discover that resulted in consent orders from the Federal Reserve and FDIC.

During 2025, more than 180 bank M&A deals were announced for a combined $49 billion of value compared to 125 deals for a total of $16.3 billion in 2024 per S&P (not including Capital One/Discover) and a paltry $4.1 billion in 2023. The most significant bank M&A transactions announced in 2025 included Fifth Third’s $10.9 billion acquisition of Comerica, Pinnacle’s $7.9 billion merger of equals with Synovus, Huntington’s $7.6 billion acquisition of Cadence Bank and $1.9 billion acquisition of Veritex, and PNC’s $4 billion acquisition of FirstBank. Perhaps most remarkable is the significantly improved bank regulatory processing timeline for larger transactions. Each of the aforementioned deals announced in the second half of the year had already closed by early 2026.

2. Key Trends in Bank M&A

We outline below several of the key trends in bank M&A transactions announced in 2025.

The first is a continued recognition that additional consolidation and scale is needed at the regional bank level to be competitive with the largest banks and a desire to be proactive and opportunistic now that the regulatory environment is more receptive to M&A. The advantages of scale in banking — new technologies, delivery channels, breadth of products and services — have increased, and the largest banks have shown both resilience and strong organic growth, benefiting from deposit outflows from smaller institutions. Banks have become increasingly strategic about adding the type of scale that will drive profitable growth. Expansion into higher growth and desirable geographic markets (typically high-growth urban areas in Texas and the Southeast) was a key driver for M&A in 2025. These markets are expected to create growth for acquirors through a combination of attractive demographics and higher business demand in these markets and an improved competitive position resulting from superior technology and breadth of product offerings. Another important driver of profitable growth through consolidation was the desire to combine commercial banking franchises with the low-cost stable deposits generated by strong retail banking franchises.

Huntington’s acquisition of Veritex accelerated its growth initiatives in Texas by expanding its presence in the Dallas-Fort Worth and Houston urban areas. Huntington viewed Texas as an attractive market due to its dynamic and fast-growing economy. The larger Cadence transaction supplemented this growth by further enhancing Huntington’s market share in Dallas- Fort Worth and Houston and more generally in Texas and also expanded Huntington’s franchise into 21 states, including new high-growth markets in the South that Huntington believed would create a powerful platform for further organic growth and investment. Fifth Third in its acquisition of Comerica touted its expansion into high-growth markets of Texas, California and the Southeast, citing the fact that the combined entity would operate in 17 of the fastest growing markets in the country. Fifth Third also emphasized the combination of Comerica’s strong middle market banking franchise and footprint with Fifth Third’s retail banking and digital capabilities, which provide low-cost stable deposit funding. PNC’s acquisition of First Bank expanded PNC’s presence into fast-growing markets in Colorado and Arizona, which PNC had already targeted for de novo growth. PNC commented that the acquisition would effectively pull forward a decade of planned expansion to create an immediate presence in these markets, and also highlighted First Bank’s deep retail depositor base and low-cost deposits. Finally, the combination of Pinnacle and Synovus created a large Southeastern regional bank headquartered in the key urban centers of Atlanta and Nashville, which are some of the largest and fastest growing markets in the United States. Another key tenet of the transaction was the adoption of Pinnacle’s highly regarded entrepreneurial operating and compensation model and the belief that deploying that model across a larger asset base in attractive markets in the Southeast would create additional growth and an opportunity for a multiple-rerating for Synovus.

Second, acquirers evidenced an increased willingness to cross key regulatory thresholds. The Pinnacle/Synovus transaction resulted in the two institutions crossing the $100 billion threshold and becoming a Category IV banking institution, which results in additional regulatory requirements, oversight and expenses. The executives of both companies went to great lengths to reassure investors that they were well prepared to cross this critical threshold and had appropriately modeled the additional expense associated with the increased compliance burden. The Fifth Third/Comerica transaction resulted in Fifth Third crossing the $250 billion threshold and becoming a Category III institution with $294 billion in assets and the Huntington/Cadence transaction resulted in Huntington crossing the same threshold with $279 billion in assets. The willingness to cross these thresholds was likely motivated by a view that the increased regulatory requirements and supervisory expectations would be applied by the regulators in a transparent and equitable manner and by careful pre-planning that positioned these institutions to comply with the enhanced requirements. While certain institutions were more willing to cross these thresholds in 2025, we do believe that they continue to generally act as a constraint on M&A and that increasing these asset thresholds is on a list of priorities for the new administration and likely to occur in 2026.

Third, another trend facilitated by the improved regulatory environment and accelerated regulatory approval timelines is the ability to complete multiple acquisitions within a relatively short period of time. During the last few years, the protracted regulatory approval processes resulted in larger transactions often taking approximately a year to close. Following the transaction, the combined company was effectively off the chess board as an acquirer until the integration had been successfully completed and fully validated by the regulators, which was a process measured in years rather than months. Prior to the last administration, however, it had not been unusual to see active acquirers complete a series of transactions within a short period of time, such as BB&T’s acquisitions of Citigroup’s Texas branches, Susquehanna and National Penn in quick succession. Surprisingly, only a handful of banks have been able to take advantage of this. Notably, Huntington took the unusual step of filing the regulatory applications the same day that it announced the Veritex transaction. Then, just one week after it closed that deal, Huntington announced the Cadence transaction (and only approximately three months after it announced the Veritex transaction). Other examples of this trend included Prosperity Bancshares’ $322 million acquisition of American Bank Holding Corp. and $269 million acquisition of Southwest Bancshares in 2025, which were followed by Prosperity’s announcement, in January 2026, of its agreement to acquire Stellar Bancorp in a $2.0 billion transaction, as well as TowneBank’s $120 million acquisition of Village Bank and Trust, $476.2 million acquisition of Dogwood State Bank and $203 million acquisition of Old Point Financial Corporation (all three either completed or announced in 2025) and Seacoast’s $710 million acquisition of the Villages Bancorporation, Inc. and $111 million acquisition of Heartland Bancshares.

Finally, a trend that has continued is that the largest bank M&A transactions in 2025 were all strategic mergers with traditional fixed exchange ratio structures for the stock portion of the consideration, without any collars, ticking fees or complex pricing mechanisms. All of these transactions other than PNC/First Bank were all-stock mergers. PNC/First Bank was unique in the disparity in size between the acquiring and target institutions and was structured as a cash/stock election with a 70% stock/30% cash mixture (as noted above we have seen the use of mixed cash and stock consideration in the Santander/Webster and Prosperity/Stellar transactions in 2026). None of these referenced transactions had unusual conditions, termination rights or walk-away provisions. The merger agreements for these transactions provided a high level of closing certainty with strong deal protection (which was reciprocal in the all-stock strategic transactions) and included a strong mutual commitment from both parties to use the necessary efforts to secure required regulatory approvals. Several of these customary deal protection provisions were challenged by an activist investor seeking to enjoin the closing of the Fifth Third/Comerica merger. In a recent decision, the Delaware Chancery Court issued a clear and forceful opinion applying longstanding Delaware doctrine to reject the plaintiff’s claims and uphold the types of deal protections that we have long advised are appropriate for strategic mergers and demonstrate to the parties and the market a highly certain closing.

3. Regulatory Developments Impacting Bank M&A

During 2025, the Federal Reserve introduced significant supervisory changes driven by Vice Chair for Supervision Miki Bowman that represented a return to a more normal regulatory approach rightly focused on material financial risks that directly affect bank safety and soundness, rather than non-material, procedural or subjective issues. Similar changes were driven by the new leadership of the FDIC under Chairman Travis Hill and by the OCC under Comptroller Jonathan Gould. The return to focusing on material financial risks and a tone-from-the-top that is supportive of dynamism in the banking industry will result in more banks being able to engage in bank M&A and provide management teams with increased visibility and certainty in the supervisory expectations that they will face upon completion of a transaction.

As part of these changes, the Federal Reserve promulgated changes to the LFI rating framework, taking effect in January 2026, that consider a firm with no more than one deficient rating to be “well managed.” As a result, a firm that has a deficient rating only in Governance & Controls would not be restricted from engaging in deal activity. In addition, the change in supervisory posture has already resulted in improving supervisory ratings at institutions. Based on the most recent supervisory report from the Federal Reserve, as of June 30, 2025, the number of large institutions that did not have satisfactory ratings across all LFI rating components had decreased from two-thirds to one-half, trending towards a more normalized level. In addition, the number of outstanding supervisory findings at community banking organizations and regional banking organizations also fell during 2025. The changes to the LFI rating framework also bode well for bank acquisitions of nonbanks that do not require prior approval of the Federal Reserve, but which do require “well managed” status. We expect continued interest in large nonbank acquisitions, following announcements regarding Schwab’s acquisition of Forge Global Holdings in late 2025 and Capital One’s acquisition of Brex in early 2026.

A significant development was the accelerated timeline for deal approvals. According to the Financial Times, the average time to complete a deal after announcement in 2025 fell to approximately fourth months, the shortest since at least 1990. Under the prior administration, transactions with deal values over $500 million averaged 10 months to closure. A lengthy approval time delays the economic benefits of a merger, creates increased risk of employee attrition and distraction for the management team during the pendency of a transaction, puts a halt to capital investment and other strategic initiatives by the acquirer and target and creates heightened risk that a macroeconomic event (such as interest rate movements or liquidity pressures at other banks) or other externality could derail a transaction or change the underlying deal calculus. Consistent with the overall trend noted by the Financial Times, approval timelines for large bank merger applications in the second half of 2025 improved significantly. At the Federal Reserve level, PNC/First Bank was approved in approximately three months post-announcement, Pinnacle/Synovus in three months, Huntington/Veritex in two-and-a-half months and just under three months for Fifth Third/Comerica. Meanwhile, the OCC implemented a general practice of reviewing applications in approximately 45 days and the FDIC also moved to significantly expedite approvals.

One significant area for improvement, however, is the practice of requiring Federal Reserve Board approval for any transaction that has received an adverse comment letter. Certain commenters routinely object to bank transactions using form comment letters that are devoid of substance. Federal Reserve Board review of an application results in a significant delay in the processing of an application, particularly for smaller transactions that otherwise would not require Federal Reserve Board approval and would be candidates for expedited processing by the regional Federal Reserve Bank. Based on the data released in the Federal Reserve’s most recent semi-annual report, the average time for the Board to approve a bank merger application since 2022 is 215 days for all Board approved transactions compared to 92 days for all approved bank merger applications (inclusive of those that required Board approval). These longer processing timeframes result from a combination of securing the vote of the full Federal Reserve Board and also as a result of increased information requests from Washington, D.C.-based staff unfamiliar with these smaller institutions and their unique circumstances. The benefits of the distributed system of regional Federal Reserve Bank for application review are all the more important for transactions involving small regional and community banks, for which the costs of supervisory complexity and uncertainty are particularly detrimental. By contrast, at the OCC and FDIC level, we have seen more expeditious management of unsubstantiated, serial adverse commenters. Vice Chair Bowman has previously highlighted concerns with the Federal Reserve’s approach to adverse comments, and we expect there will be increasing focus on how the current process weighs on smaller banks.

4. Outlook for 2026 Bank M&A

The surge in financial institutions M&A in 2025 has led to bold predictions for a wave of consolidation in 2026 and there is reason for continued optimism given the more receptive regulatory environment and improved economic factors supporting stronger bank earnings. The recently announced $12.3 billion acquisition by Santander of Webster Financial and the $2 billion acquisition by Prosperity Bancshares of Stellar Bancorp are encouraging. However, there are a number of countervailing factors that we believe will continue to act as constraints on bank M&A. While the regulatory environment is much more receptive to bank M&A generally, it is far more of a return to normal than a dramatic departure from historical precedent. For example, the high water mark for bank M&A since the Great Financial Crisis was in 2021 with total deal value reaching approximately $78 billion, including 13 deals announced with values above $1 billion (compared to $49 billion, including six deals announced with values over $1 billion in 2025). Moreover, we have yet to see a truly ground-breaking bank M&A deal in contrast to some other industries, such as the pending Norfolk Southern/Union Pacific railroad merger or the Paramount/Warner Bros. combination. The largest bank M&A transactions announced in 2025 have not involved any transactions between the largest regional banks or between G-SIBs, with the biggest target being Comerica, the 35th largest U.S. bank as of September 30, 2025, with approximately $77 billion in assets (and the largest target thus far in 2026 being Webster with approximately $80 billion in assets). In addition, many of the larger deals continue to be market extension transactions, a remnant from the prior Administration which subjected mergers to a more stringent antitrust regime and discouraged branch closures. Some of the most successful bank mergers in history were large in-market transactions, such as PNC’s merger with National City in 2008, and now is an opportune time to do them.

The most significant headwind however, is not regulatory, but current market dynamics. There is a view among bank investors that some of the largest transactions in recent years, most prominently the merger of equals that created Truist, have not lived up to expectations, as well as continued investor focus on tangible book value dilution with a three-year earnback often being viewed as the outer limit of what the market will accept. In several of the largest bank deals announced in 2025, the acquirer’s stock price dropped significantly immediately following announcement, although typically recovered over time. In the fourth quarter of 2025, following a flurry of deal announcements, this dynamic led to divergent stock price performance of banks that were perceived as targets trading up while banks that were perceived as potential acquirors traded down.

An increase in activism has also impacted bank M&A. While it initially appeared that activism may be an accelerant for M&A, activist criticism has more recently focused on the performance of prior acquisitions and allocations of capital for acquisitions versus buybacks, and an activist unsuccessfully challenged the Fifth Third/Comerica transaction. The activism pressure resulted in certain targeted banks publicly swearing off the pursuit of acquisitions in the near-term and committing to focus on returning capital to shareholders. More generally, the market dynamics, likely coupled with the activism threat, collectively led to bank executives distancing themselves from bank M&A during investor conferences in the fourth quarter of 2025 and first quarter earnings calls and espousing organic growth as the priority.

Factors that we believe will continue to drive additional bank M&A include competitive pressures from the largest banks, which now includes a formidable competitor in Wells Fargo after being released from its regulatory asset cap. Competition is also expected to increase from outside the banking industry as the Administration’s deregulatory agenda lifts all boats. This includes competition from fintechs that embrace AI and technological innovation, stablecoin and other developments in crypto as a form of payment and store of value and from private credit. The fears of AI-related disruption and displacement that initially resulted in an early 2026 sell-off in software stocks has spread to other parts of the market including banks and other financial services companies and created concerns of a potential credit bubble in private credit, including due to the concentration of loans to companies who may be adversely impacted by AI. At a minimum, increased competition and the need to make investments in technology and innovation will put pressure on banks to increase scale and growth and will likely also lead to banks seeking to bolster their technology stack and product offerings through acquisitions of fintechs. Another frequent driver for M&A is CEO succession planning, which was a key factor in Pinnacle’s decision to seek a merger partner. According to a Russell Reynolds study published in late 2024, the average age of current banking CEOs is 58 and nearly 25% of banking C-level executives are 65 or older. And lastly, an important driver for M&A will be the fear of missing an open regulatory window for consolidation coupled with the dynamic that announced deals inspire increased confidence in management teams and board rooms and puts increased competitive pressure on other institutions.

Ultimately, the economic environment will have a significant impact on deal activity in 2026. If the conditions remain favorable, bank executives and boards would be well advised to carefully consider consolidation and growth-oriented offensive strategies, particularly as the current Administration enters its second year and the window of opportunity begins to close. Much will depend upon the ability of the larger transactions announced in 2025 to successfully integrate the combined companies, achieve announced financial targets and synergy numbers and for that performance to be rewarded with stock market appreciation that makes investors more receptive to M&A. A critical component of that success will be retaining and incentivizing the key employees of the target institution, which we discuss below in Section III.D.

B. Fintech

2025 was transformative for the fintech industry, with a series of transactions that have the potential to reshape the payments ecosystem, for issuers, merchants, consumers and the payments technologies that connect them. These transactions re-aligned and focused strategic priorities of established fintechs and enabled financial services firms to stay on the leading edge of new technologies and the current period of rapid innovation.

In April, Global Payments, FIS and the private equity firm GTCR announced one of the largest — and most complex and creative — M&A transactions of the last several years. In the three-way, two-part transaction involving a combined $37.8 billion in transaction value, Global Payments sold its Issuer Solutions business to FIS for $13.5 billion and acquired Worldpay from GTCR and FIS for $24.25 billion. Involving three parties, two separate businesses and two definitive transaction agreements, the Worldpay and Issuer Solutions acquisitions were independently the two largest financial services transactions announced in 2025. Together, the transactions position Global Payments as a pure play provider of merchant solutions and FIS as a scaled fintech provider to large financial institutions. In order to achieve its strategic vision, Global Payments entered into two separate transaction agreements, each of which was cross-conditioned on the other such that one leg of the transaction could not be completed unless the other leg was completed concurrently, with each company having the opportunity to realize the value proposition of strategic simplification. After a global regulatory approval process for both acquisitions that was completed in less than nine months, the combined transaction closed in January 2026, well ahead of the parties’ initial expectations.

The very next day following the announcement of the Global Payments transactions, the Federal Reserve and the OCC approved Capital One’s $51.8 billion acquisition of Discover. That closing of that transaction in May enabled Capital One, a long-time financial technology innovator, to bring scale and technological investment to the Discover network, extending Capital One’s reach into payments technology.

The completion of Capital One’s acquisition of Discover and the announcement of the Global Payments transactions marked the beginning of a wave of a number of other significant transactions in the fintech sector announced in 2025, including Xero’s $2.5 billion acquisition of Melio Payments, a business-to-business payments platform that counted Capital One and Fiserv as strategic investors, as well as Clearlake’s $4.1 billion acquisition of financial data and analytics company Dun & Bradstreet, NEC Corporation’s $2.9 billion acquisition of CSG Systems and Centerbridge Partners’ $2.0 billion acquisition of MeridianLink. The IPO market for fintechs also thawed in 2025 with fintechs having some of the highest profile debuts in 2025, with Chime going public at an $18.4 billion valuation, Klarna at $15 billion and Circle at $6 billion. The improved regulatory environment has also led several fintechs, including PayPal, Ripple, Circle and Affirm, to seek bank charters.

The momentum for fintechs has continued in January 2026 with Capital One announcing its $5.15 billion acquisition of Brex, the AI-powered business payments and expense management platform. Brex complements Capital One’s Discover acquisition as Capital One continues its evolution as a dynamic banking and global payments leader.

Taken together, these transactions demonstrate that, with strategic vision and a creative approach, there are abundant opportunities in fintech for M&A that create long-term value. As innovation continues and new disruptive technologies emerge, including as a result of developments in artificial intelligence and cryptocurrencies, fintech will continue to be a sector with significant M&A activity in 2026.

C. Investment and Wealth Management

In 2025, following a number of landmark asset management transactions announced in 2024, including Blackrock’s acquisitions of Global Infrastructure Partners and HPS, asset management continued to be an area of significant dealmaking. In 2025, asset managers continued to pursue scale and AUM through M&A, and, as in other areas of financial services, the development of artificial intelligence was a significant catalyst for M&A, as firms recognized the power of that technology to improve operating efficiency and client experience.

The $7.4 billion acquisition of Janus Henderson by Trian Fund Management and General Catalyst, announced in December 2025, was the largest public company asset management transaction of the year. The take-private of Janus Henderson, a traditional asset manager with a rich heritage, exemplifies the power of technology to spur M&A, as Trian and General Catalyst recognized an opportunity to invest in technology and drive growth. In particular, the opportunity for General Catalyst, with origins as a venture capital firm, to apply artificial intelligence to enhance Janus Henderson’s investment business and operations, provided a significant strategic rationale for the transaction. Shortly prior to this publication, Janus Henderson received a competing proposal from Victory Capital.

Goldman Sachs and Charles Schwab were also active and forward-thinking acquirors in 2025, employing M&A to add to their range of cutting-edge investment solutions. In October 2025, Goldman Sachs Asset Management announced its up to $1.0 billion acquisition of Industry Ventures, an innovative venture capital platform with investments across the venture capital lifecycle and, in December 2025, Goldman Sachs announced a $2.0 billion acquisition of Innovator Capital Management, a pioneer of specialty “defined outcome” ETFs. Likewise, in November 2025, Schwab announced its $660 million acquisition of private markets platform and trading marketplace Forge Global, expanding Schwab’s offerings in the growing private investments markets.

Other significant asset management transactions in 2025 include the recapitalization of Rockefeller Capital Management in a transaction that valued Rockefeller at more than $6.6 billion, BNP Paribas’s EUR $5.1 billion acquisition of AXA Investment Managers, an asset management platform with EUR $1.5 trillion in assets under management, and the completion of Brookfield’s acquisition of Oaktree. The pace of dealmaking in asset management has not slowed in 2026, with CVC beginning the year by announcing its acquisition of credit manager Marathon Asset Management for $1.2 billion.

D. Insurance Underwriting, Brokerage and Insuretech

While M&A among insurance underwriters remained relatively subdued in 2025 in terms of overall deal volume, the market witnessed a number of sizeable transactions in the face of slowing organic growth, with numerous deals focused on specialty line insurance. Notable transactions include AIG and Onex’s $7 billion joint acquisition of Convex Group (and AIG’s strategic investment of $640 million in Onex), Endurance Specialty Insurance’s $3.5 billion acquisition of Aspen Insurance Holdings from Apollo, Howard Hughes Holdings’ $2.1 billion acquisition of Vantage Group Holdings, Radian’s $1.7 billion acquisition of Inigo, and DB Insurance’s $1.7 billion acquisition of Fortegra Group.

M&A within the insurance brokerage and managing general agent (MGA) space remained active in 2025, with notable deals including Brown & Brown’s $9.8 billion acquisition of Accession Risk Management from Kelso, Willis’s $1.3 billion acquisition of Newfront, and Gallagher’s $1.2 billion acquisition of specialty broker Woodruff Sawyer. The year also witnessed some significant “insuretech” transactions, including Munich Re’s $2.6 billion acquisition of NEXT Insurance and Verisk’s $2.35 billion acquisition of AccuLynx, as well as a spate of IPOs of property and casualty insurers.

Assessing the overall macro and industry landscape, as well as a friendlier antitrust enforcement outlook and increased use of AI in underwriting and claims administration, we expect to continue to see robust insurance underwriting, brokerage and insuretech deal activity in the year ahead.

III. Financial Services Developments and Preparedness

A. The Impact of AI on Financial Services (and Deal Activity)

Financial institutions have long been at the vanguard of technological adaptation, both for purposes of meeting evolving customer expectations and to harvest efficiencies. The transition from paper-based systems and “brick and mortar” branch-centric banking to electronic recordkeeping and online banking is a case in point; but this transition took decades. In contrast, AI capabilities have advanced with dizzying speed, and financial institutions now face the tantalizing opportunity, but also daunting challenge, of capitalizing on new technology to remake vital aspects of their operations to their competitive advantage, while continually satisfying safety and soundness obligations.

In early 2026, the release of advanced AI tools by Anthropic and Open AI and new AI automation tools for legal, financial research and data marketing tasks created a sudden mass realization that AI capabilities were advancing at a more rapid pace than previously understood. This resulted in a sharp market sell-off in stocks for software-as-a-service (SaaS) companies due to fears that these companies could be replaced by agentic AI. This disruption in the market then spread to other sectors including insurance brokerage stocks and wealth management stocks following the release of new sector-specific AI tools, and then more broadly to banks and other financial services companies. It is too early to predict who the winners and losers will be but it is becoming clear that AI will have a transformative impact much sooner than many expected, including on the financial services industry.

Domains already experiencing AI-driven disruption, to name but a few, include:

• Customer service. Today’s financial institutional customer increasingly demands “always on” customer service with a high degree of functionality. Agentic AI tools such as Bank of America’s “Erica” virtual financial assistant and Capital One’s “Eno” text-based chatbot already assist millions of customers with daily banking tasks, both providing enhanced service levels and back-of-house efficiencies (relative to 24-hour call centers and the like).
• Anti-fraud. AI tools have significant utility in combing large data sets to identify and respond to unusual behaviors or patterns in real-time, offering significant benefits relative to manual fraud identification and response processes.
• Payments. AI is being used to effectively automate processes and workflows within the payments ecosystem and other back-office functions that have historically often relied on manual processes.
• Underwriting. Relative to manual underwriting processes which may be time consuming and inconsistent in application, AI tools are able to synthesize large volumes of application data, using iteratively refined methodology, and to assist in loan workflow management and performance modeling.
• Investment Research and Portfolio Analysis. Similar to the use case for underwriting, AI tools are increasingly being used to analyze market-related data to assist in identifying investment opportunities and optimizing portfolios, including the new wealth management tools referenced above.
• Compliance/regtech. AI tools are helping financial institutions automate aspects of regulatory reporting and assisting with quality control (such as by facilitating document reviews and summaries), management of sensitive data, and modeling the effects of prospective regulatory changes.

Large financial institutions are already deploying AI at scale across front and back offices (often with dedicated investment in internal systems) and an ever-growing archipelago of fintechs and consultants clamors to provide off-the-shelf services to institutions of all sizes.

We expect the technological transformation currently afoot to be a significant driver of financial institution transactional activity (M&A, joint ventures and major tech investments) for several reasons which are outlined below. We have already seen AI as a key strategic thesis in M&A transactions including Capital One’s $5.15 billion acquisition of Brex and the $7.4 billion take-private of Janus Henderson by Trian and General Catalyst:

• There is a growing gap between institutions at the vanguard of AI and regional and community banks without the resources or capabilities to apply emerging tools to transformative effect. Some organizations will find it advantageous to benefit from these capabilities through a sale or acquisition rather than play catch-up.
• Effective AI implementation is conducive to synergies, such as streamlining customer-facing and back-of-house functions. Some organizations without the ability to themselves harvest these synergies may create opportunities for capable acquirors.
• While AI is advanced enough that adaptation is a must, the development of AI is evolving rapidly such that there is risk of dependency on a suboptimal path (indeed, some AI tools have had latent issues, such as propensity to hallucinate or to engage in bias; AI strategies, workflows and tools must be assessed with extreme care). Some institutions with seemingly well-crafted strategies today may nevertheless need a deal to pivot if their strategy is not effective.
• AI tools have the potential to reduce significant pain points in the M&A process itself, particularly in the domains of systems conversion and integration, which are notoriously costly, labor intensive and time-consuming processes.

B. Developments in Cryptoassets

The cryptoasset sector benefited from powerful tailwinds in 2025 with a decidedly pro-crypto presidential administration. Crypto exchange-traded products experienced record inflows, and significant progress was made with respect to stablecoin adoption and tokenization of “real world assets,” and long-sought regulatory clarity began to emerge (although enthusiasm was somewhat muted in late 2025 and early 2026 with cryptoassets heading into a decidedly bear market). As financial institutions of all profiles survey a changing landscape, key themes for 2026 include the following:

Financial regulators are now open to cryptoasset-related activities. The arbitrarily imposed ban on banks engaging in cryptoasset-related activities was lifted in 2025, with the Federal Reserve, FDIC and OCC all rescinding prior stringent requirements so as to enable financial institutions to engage in activities such as cryptoasset custody and engaging in stablecoin-related activities. As a result, financial institutions are increasingly building out crypto-related service offerings, including through strategic partnerships with fintech firms. Coupled with the SEC’s rescission of Staff Accounting Bulletin 121 (which had required custodied cryptoassets to be accounted as balance sheet liabilities, with prohibitive regulatory capital effects), we expect this trend to accelerate. And several crypto-focused institutions have obtained conditional national trust bank charters.

Growing stablecoin adoption. In July 2025, the GENIUS Act was signed into law, establishing a regulatory framework for the issuance of dollar-denominated stablecoins backed by full 1:1 reserves of high-quality liquid assets subject to audit, and a framework for prudential supervision. Such “payment” stablecoins, which already have a market capitalization exceeding $250 billion, offer the prospect of significantly improving payment rails, including through, among other possibilities: providing near-instantaneous settlement (by contrast with ACH and wire transfers); reducing transaction costs for transferring or spending money; and expanding financial access to the unbanked. While, as of this writing, implementing regulations have yet to be adopted, numerous traditional financial institutions have announced that they are actively developing stablecoin products. One significant looming issue is whether digital asset service providers (such as centralized exchanges) can continue to offer customers yield on their stablecoin balances, given pronounced banking industry concerns that, as stablecoin popularity grows, traditional deposit funding could be stymied, with a negative impact on fractional reserve lending.

Real world asset tokenization. Progress towards representing “real world assets” (e.g., securities) in tokenized form is proceeding apace. The NYSE has announced its development of a platform for 24/7 trading and instantaneous on-chain settlement of tokenized securities, with stablecoin-based funding. Financial institutions including BlackRock, JPMorgan and Citigroup have built infrastructure platforms that use tokenization, such as BlackRock’s tokenized money-market fund, BUIDL. Given the manifest efficiencies, it appears that blockchain-based rails will increasingly undergird traditional trading activity. The nexus to public blockchains, such as Ethereum, vs. private institutional networks, remains an open question, as does the prospect of traditional securities being traded and settled through decentralized software applications (“DeFi”).

Burgeoning M&A activity. Cryptoasset-related M&A reached a record level in 2025, witnessing 17 transactions with a value exceeding $500 million each, with notable transactions including Ripple’s $1.25 billion acquisition of prime brokerage Hidden Road. We expect continued robust M&A activity in the sector (although declines in cryptoasset prices represent a significant headwind) and for sectoral deals to represent a growing portion of fintech M&A, and to include traditional financial institutional participation.

C. Key Observations about Shareholder Activism

Financial institutions, and banks in particular, have always had some degree of insulation from aggressive shareholder activism given the regulatory overlays and the regulatory approvals required in connection with both control transactions and significant acquisitions that fall short of true control. That said, the industry has never been immune from attack, and the asset management industry in particular has seen significant activity over the years, including at Legg Mason, State Street, Bank of New York Mellon, Invesco and Janus Henderson.

Activism relating to traditional banking organizations however, has largely been limited to community banks and smaller regionals, and has been relatively few and far between and dominated by a small handful of repeat activists. 2025 saw a bank activist draw headlines that were outsized relative to its capabilities and economic holdings by virtue of its vituperative public presentations targeting a number of banks. This publicity has led many banks that hadn’t given much thought to activism recently to consider whether they should be taking any particular actions.

We talk more in Chapter 3 about preparing for and dealing with activists for financial institutions generally but, within the bank holding company space, the key point to remember is that each institution controls its own destiny. In an unregulated industry, activists can take control of boards of directors and can push for the sale of the company, enhanced share repurchase programs, increased dividends, spin-offs, business strategy changes, excessive cost-cutting, management changes and the like. Use of this traditional activist tool kit — as a practical matter — is more limited in the bank space given the regulatory approval requirements, capital rules, safety and soundness considerations, prohibitions on overlapping directors, the needs of potential buyers to undertake comprehensive diligence, and other restrictions. This is not to say that public pressure from an activist isn’t disconcerting to board members or management teams or that it should be ignored. However, boards and management teams that are thoughtful, prepared, coordinated and willing to withstand the pressure can and should carefully assess the situation and not be forced into taking actions that are contrary to the best long-term interests of their stockholders and other key constituencies.

D. Compensation and Retention Remain Critical Deal Issues

An essential part of the value and sustainability of any financial services firm is the talent and personal relationships of the firm’s management and employees. In many financial mergers, the primary assets to preserve and acquire are the people, and thus issues surrounding compensation — such as the treatment of equity awards, severance protection and retention arrangements — are often of critical importance to the deal. Some transactions, particularly mergers of equals, also serve as an occasion to implement chief executive officer succession planning. Whether the senior management of a target is intended to depart at closing, stay for some transition period or become part of the combined company’s leadership team, a thoughtful and holistic approach needs to be given to the handling and integration of the parties’ existing compensation arrangements, taking into account relevant tax consequences and limitations as more fully discussed in Chapter 2.

Both inside and outside of the transaction context, executive compensation and broad-based incentive compensation matters at financial institutions continue to be sensitive subjects that are scrutinized by the media and shareholders. Due to the influence of proxy advisors and increased regulatory focus and public scrutiny on executive compensation, the design of compensation arrangements in the ordinary course has resulted in a heavier weighting of performance-based compensation with decreased leverage, the disfavored use of stock options in favor of full value awards, longer vesting periods and the implementation of holding period requirements. Simultaneously, “golden parachute” excise tax gross-ups and single-trigger vesting are disfavored and have mostly been eliminated.

In businesses where individuals are the key assets being acquired, transaction parties work to ensure the delivery of those assets with the deal by implementing compensation arrangements that are designed to both incentivize and retain key employees. These arrangements have historically included non-competition and other restrictive covenants that sought to limit the employee from leaving for a competitor prior to or after the transaction. While the Federal Trade Commission (the “FTC”) formally abandoned its proposed noncompete ban in September 2025, it continues to pursue targeted enforcement actions with respect to noncompete covenants that it views as unlawfully anticompetitive. Meanwhile, noncompete covenants are increasingly more regulated at the state level, with many states adopting noncompete statutes in recent years. Even in the absence of a statute, state courts are applying increasing scrutiny in examining restrictive covenants pursuant to applicable case law, including in jurisdictions such as Delaware that historically have been viewed as supportive of protecting an employer’s right to enforce restrictive covenants. Regardless, acquirers that are relying on the retention of key employees need to understand relevant state laws on non-competition restrictions, or run the risk that a generous multi-year retention offer can be shopped by the employee.

The treatment of outstanding equity awards in a transaction is critical since these awards often represent a significant portion of an executive or other key employee’s compensation for past services. Severance and termination protections also reduce unwanted defections by addressing executive uncertainty through providing key individuals with greater security against the risk of an involuntary termination (without “cause” or due to a “constructive discharge”) associated with combining two companies, as cost savings and synergies are often meaningful considerations when evaluating the benefits of a transaction and it is inevitable that there will be some executive and employee terminations. Relatedly, well-designed retention programs can mitigate the disruptive potential of a deal on needed personnel as an additional and discrete financial incentive to remain focused on the company’s best interests and mitigate personal uncertainty; a holistic design incorporating both “upside” incentives (retention awards) and “downside” protections (severance benefits and vesting) is often the most effective approach.

Corporate transactions inherently involve planning for, and the implementation of, one or more executive transitions. But as transactions become increasingly complex, executive transition arrangements become more bespoke to meet the circumstances. For example, the chief executive officer of one of the merger parties may assume the role of executive chair of the combined company for a defined term following the closing, or may serve as non-executive chair, as a non-employee director, or in an advisory role, whether as a non-officer employee or as a consultant. The role and the corresponding compensation must be tailored to the parties’ needs, with consideration given to treatment of change-in-control compensation and the Section 280G and Section 409A tax implications for the executive and for the combined company.

When carefully structured, taking into account tax considerations, deal-related compensation programs can play a critical role in guaranteeing the successful completion and integration of the transaction and the future stability and strength of the combined company.

The full guide is available here.