Financial Technology, Data, and Analytics

Dear Clients and Friends

The market is up, the market is down, and it doesn’t seem to matter right now; interest in the Fintech sector keeps marching on. Our report found below highlights some of the m&a trends and transactions in the seven segments of the Fintech world that we follow, and sometimes lead, and so far, it’s all still pointing up. Please read more in our August Fintech Market Update below.

A recent report by KPMG indicated that in Q2 the global Fintech industry saw $8.4bn in transaction value as a result of around 290 deals – up from around 260 deals in Q1. We note that investments into, and purchase of, b2b Fintech firms are particularly in vogue. The $3.6bn buyout of Canada’s D+H by Vista Equity was not only the biggest deal of the quarter, it was also a reminder that Fintech is about a lot more than just payments and lending. The D+H deal notwithstanding, it is smaller deals where most of the action is – most Fintech transactions are well under $200mn. And while a few Asian firms continue to draw very high values, the cumulative value of Fintech deals in Europe doubled compared to the prior quarter to around $2bn.

The sources of capital are many, including traditional VCs and PE firms. But it is interesting to note that about $2.5bn of Q2 investment came from corporates – as the disrupted continue to push back – buying or investing in those who would be the disruptors.

For some, the focus is on buying or investing in companies that help improve the efficiency of back-office functions along with those that provide reg tech, insurance tech, capital markets tech, exchanges, enterprise data, analytics, cloud-based services and AI. (See our take on the AI phenomenon here.)

All this is not to say that consumer-based Fintech is out of favor. There are still a bunch of Fintech Unicorns out there: Lending Club, Square, Credit Karma, SoFi, Kabbage, Funding Circle, Gusto (Zenpayroll), Klarna, Avant Credit, Prosper Transferwise, Mozido and more. 26 of them by some counts – more than half of which are in China. But with regulators weighing tougher rules on consumer-oriented firms, Powa going bust, Zenefits seeing a big drop in market cap, and some of the largest consumer based Fintech companies cutting back growth estimates – and in some cases, jobs – there does seem to be some increased interest in looking to b2b Fintech companies.

You can see more about the trends and deals in Fintech m&a in the report found below. As you will see, values and volume in all seven sectors of the Fintech world that we follow – and sometimes lead, remain strong. Please see the most notable deals below:

• 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 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,
• Betterment (New York, NY) raised $70mm in a round of funding led by existing investor Kinnevik, and including other existing investors Bessemer Venture Partners, Menlo Ventures, and Francisco Partners.

Please read more from our Fintech Market Update, below.