Fintech battle between incumbents and newcomers yields mammoth M&A deals, says Hampleton Partners report
The latest Fintech M&A market report from Hampleton Partners, the international technology mergers and acquisitions advisor, reveals that 2019 saw a shift towards blockbuster M&A transactions, historically high deal count levels and impressive valuations.
2019 proved to be the second richest of the decade in terms of fintech M&A activity, with a massive 439 transactions and a disclosed transaction value of over USD130 billion – almost twice the largest disclosed value recorded to-date (USD71 billion in 2018). Valuation multiples continued their rapid climb in the second half of 2019: the trailing 30-month median revenue multiple peaked at a record 3.8x, while the EBITDA multiple jumped to a whopping 17.3x, just shy of the record set in H1 2015.
Jonathan Simnett, director, Hampleton Partners, says: “2019 was characterised by record levels of fintech M&A activity, abundant fundraising value, and the achievement of exceptional multiples.
Transaction volume in the second half of 2019 saw a three-year high and set a new record of over USD130 billion for disclosed transaction value.
“Traditional financial players are battling for relevance and scale – relevance being the ability to offer solutions that are ubiquitously available and in demand; and scale referring to the number of customers incumbents can gain and retain in the face of non-traditional competition. The new battleground requires new capabilities and incumbents must adapt and acquire now, or they will decline later.”
In 2019, four enormous M&A deals set the record for the largest transactions ever recorded in fintech history: Fidelity’s acquisition of Worldpay (USD44 billion); Fiserv’s acquisition of First Data (USD22 billion); the merger of Global Payments with Total System Services (USD21 billion); and London Stock Exchange Group’s acquisition of Refinitiv (USD14 billion). Combined, they accounted for a transaction value of almost USD101 billion.
The largest fintech disclosed deals of H2 2019 were:
• London Stock Exchange Group’s acquisition of Refinitiv – USD14.1 billion;
• Mastercard International’s acquisition of Nets Holding - USD3.2 billion
• BC Partners’ acquisition of Advanced Computer Software Group - USD2.2 billion
Simnett says: “Fintech M&A globally is expected to remain a hot sector heading into 2020, particularly given the large M&A deals that have taken place so far this year. The payments vertical will no doubt receive an abundance of investment, while insurtech, regtech, wealthtech and B2B platform services are all well positioned for growth. Fintech investors are, and will continue to be, very selective in deploying capital, favouring larger, more promising fundraises and moving away from the “spray and pray” approach of the early stages of the sector.
“Meanwhile, with large technology companies knocking at their doors, incumbent financial institutions must continue to engage aggressively with fintech disruption, whether by building their own capabilities; by partnering; or by acquiring, given the pace of innovation in the sector.”