Financial Technology, Data, and Analytics

Dear Clients and Friends,

Our report found below contains an update on the dozen+ segments of the information industry that we follow that we follow and sometimes lead. 

When I was about 16, I read Robert Heinlein’s book, “The Moon is a Harsh Mistress”. Besides espousing some libertarian ideas that I thought were pretty interesting at the time, it also was my first exposure to what we now call “artificial intelligence”. In the book, a series of linked self-learning super computers becomes a single self-aware being – called Mike. A few years later we got HAL, the self-protective, self-aware computer in 2001: A Space Odyssey. And then came IBM’s Watson… and suddenly “Artificial Intelligence” was no longer the stuff of science fiction – it became real. It’s here – now. And it’s going to change everything.

CB Insights recently released a report that counted 106 AI-related startups that have received funding just since 2013. They noted that IBM has not only been building Watson, it also has been investing in and acquiring AI companies – and they are not alone. Google has bought at least a dozen AI companies as well, including Deep Minds for a reported $600 million; and more recently, India’s Halli Labs. Apple has acquired at least 8 AI companies over the past few years. Facebook and Intel have each acquired at least three. GE, Amazon, Oracle, Microsoft, and Salesforce are all over this phenomena, buying or investing in interesting AI firms where they can. Ford Motor Company bought Argo AI for $1bn. China’s Baidu has acquired at least three AI companies just in 2017.   

Watson isn’t yet HAL or Mike. It is not yet self-aware. And its ability to learn is constrained by the quality, as well as the quantity, of the data it ingests. But these systems are increasing capabilities at an exponential rate. They not only figure out what data to use and what to ignore – they derive the implications. As they improve, everything will change. Everything. Just watch.

We are now working with several companies that provide enhanced analytic capabilities by taking advantage of self-learning technologies combined with enhanced computing power – and a dash of human intelligence – to provide unique insights. It’s an exciting time to be in this industry.

Some of the more interesting m&a transactions, trends and values are discussed in our August Market Update, found below. Among others, we note:

• Vantiv (NYSE:VNTV) agreed on terms to acquire Worldpay (LSE:WPG) for $9.8bn, implying an enterprise value of $11.5bn and valuing the company at an implied 7.9x 2016 net revenue and 21.1x 2016 EBITDA,
• Blackstone (NYSE:BX) and CVC Capital Partners (London, United Kingdom) offered to acquire Paysafe (LSE:PAYS) for £2.9bn (~$3.7bn), implying an enterprise value of $4.0bn and valuing the company at an implied 4.1x LTM revenue and 15.9x LTM EBITDA,
• Ingenico Group (ENXTPA:ING) agreed to acquire Bambora for €1.5bn (~$1.7bn), valuing the company at an implied 7.4x 2016 revenue,
• Red Ventures (Fort Mill, SC) agreed to acquire Bankrate (NYSE:RATE) for $1.3bn, implying an enterprise value of $1.4bn and valuing the company at an implied 3.1x LTM revenue and 15x LTM EBITDA,
• Futu (Hong Kong, China) raised $146mm in a Series C funding round led by Tencent.

Hope that the summer is treating you and your families well.