Warburg Pincus’s Peter Deming has ‘fresh eyes’ on banking deals amid AI disruption

Warburg Pincus’s European financial and business services team has a “stack of investment memos showing up” as its focus shifts from exits to deployment, Peter Deming, managing director and co-lead of the team, told PE Hub. But a bulging pipeline demands selectivity, particularly as artificial intelligence challenges some business models – while putting other subsectors back into play.

Like many dealmakers, Deming has a sense of déjà vu about the year so far, with macro events like the war in Iran stalling a promising start – just as tariffs did in 2025. But he was optimistic that – again like last year – the large number of deal memos that bankers had been prepping before the volatility will come, even if a little later than expected.

“What’s happening in Iran might have an impact on long-term interest rates and therefore exit multiples,” he said. “So, it makes everyone calm for a second and revisit all these assumptions around exit valuations. But it isn’t structural. Once you resolve that question, the business turns back on, and everyone transacts.”

The volatility didn’t stop the exits coming from Deming’s team, which he leads with fellow managing director James O’Gara.

Alongside Permira, Warburg agreed in February to sell London-based wealth manager Evelyn Partners to UK banking group NatWest at an enterprise value of £2.7 billion ($3.7 billion; €3.2 billion), before completing in July. The same month, Warburg agreed to sell its stake in Madrid-based Singular Bank, an independent wealth adviser for individuals, families and business owners, to Dutch banking giant ING.

The Evelyn and Singular Bank exits were, by dint of their sectors, not directly affected by events in the Middle East. But another source of volatility this year means Warburg’s second-half investments could have a different flavor than its first-half exits.

The advent of AI is bringing some potential targets back into play – including European banking.

While Warburg’s US team had made a series of investments in recent years – some of which Jeff Stein, head of the firm’s US financial services group, spoke about in PE Hub’s Sector Spotlight on financial services earlier this year – and it has invested in southeast Asia, it hasn’t invested in European banks since Singular in 2019.

But Deming is viewing the sector with “fresh eyes” – and that “comes down to AI.”

“We’re looking at a few of these right now because we see a value creation opportunity that matches really well with our own capabilities,” he said. “We’re okay with regulated businesses. We’re okay with capital-intensive businesses.

“AI with a regulatory overlay creates an opportunity for these banks as incumbents. They’re unlikely to get materially disrupted. There’s a lot of inertia that happens in the banking business.”

This could turn into more than a defensive play.

“I have a long-term thesis – which I don’t know is right yet. Let’s say you’re a small business. Your bank account, all your debits and credits – that is as foundational as it gets in terms of building up P&L and understanding how your business is operating.

“I think of banks as having incredibly rich data. AI is going to be an opportunity for them to move up the value chain as a service provider.”

AI playbook

Warburg already has experience of using AI to improve services from its Evelyn investment.

Once a year, advisers must conduct an annual suitability review – speaking to clients and building a file to ensure portfolios still match their needs.

“The file side of that equation is really boring and no one likes to do it,” said Deming. “So we used AI to build these files by listening to the conversations and supplementing them with data that we had. It made the experience for the adviser better and the experience for the client better.”

AI also came into play for the back office. To position it for sale, significant investment was made in the back end, said Deming. “By the end it was gold-plated. Every adviser in the whole business used the same platform.”

Getting the back office shipshape aided in drawing strategic interest to the target.

(For more on the strategic interest in Evelyn Partners, read PE Hub’s interview with Chris Pell, managing director at Permira.)

The GPs even paused wealth management M&A for two years while focusing on integration and exiting non-core business lines, said Deming.

M&A could be another area where AI plays. Banks are known for their Gordian Knots of back-office systems, built up over years of acquisitions and often written in legacy programming languages. AI’s power as a coding tool could help the clean-up, not just in banking but in portfolio company roll-ups generally.

“We haven’t used AI to consolidate systems faster,” said Deming. “I guarantee you that’s going to be an opportunity though.”

Selectivity

AI is also serving up deal opportunities as large financial services invest to streamline operations. That pushes them to focus on smaller number of products – creating carve-out opportunities.

In fact, 100 percent of Deming’s group’s current pipeline is potential carve-outs. But private equity firms are also starting to prepare companies for sale – including assets stuck in portfolios during the sluggish exit market of the last few years when mainly top-tier assets have transacted.

“The second tier is definitely coming through,” said Deming. “What we’re getting right now is 2019 to 2022 vintage deals. The valuations at those vintages were higher than historical norms. There’s probably going to be some multiple compression. We’ll have to see if they trade or if they get postponed again.”

Warburg also plans to keep looking at the wealth manager and insurance brokerage plays that private equity has for some time found lucrative.

But the growing pipeline means Warburg must view targets through a second lens beyond the usual market and business growth criteria. That involves what it calls its “power modules” of value creation, in areas like go-to-market and back-end development.

“What’s our value creation capability and does it overlap with what this company really needs in the next three or four or five years? That conversation happens very, very early on. If we can’t convince ourselves that we have that, then we don’t even look at it. The pipeline is so big that we have to be really quite careful about where we pick our spots.

“That is taking us into different end markets than maybe we have invested in the past.”

AI also could also change the equation on businesses with “knowledge arbitrage” – effectively experts with multiple degrees and training who can charge a lot for their services.

“It’s really hard to project the value of that knowledge in the future,” said Deming. “There are segments of the market where there might still be a role for that individual because they know what questions to ask. People like having advisers take them along a journey.”

Generally, uncertainty over how AI will impact business models – something more structural than cyclical, according to Deming – will likely lead to repricing of the things that AI can do really well, he said. The firm is approaching the market disruption from multiple angles, including backing Unity Advisory, which it calls an “AI-native challenger” in the accounting sector. The company, established in 2025, aims to use AI from inception rather than bringing the tech into existing practices.

Warburg is also re-wiring an existing service model in the professional services sector with Aztec Group, in which it acquired a minority stake in 2024. The firm is also being cautious about how many AI-exposed businesses it adds to the portfolio amid the uncertainty.