Financial Technology, Data, and Analytics

Dear Clients and Friends,

We hope that your holidays were filled with family and a break from the news. Our latest report on the m&a values and trends in the dozen+ segments of the information technology industry that we follow, and sometimes lead can be found below. It may help relieve some stress. The market remains strong.

As we start the New Year we thought we would share a few predictions relevant to our world:

1. Most of the world’s equities markets will rebound in 2019 –– unless Donald Trump gets impeached, in which case all bets are off. Bull markets don’t last forever, this one will end someday too – but the year-end drop in global equity values was not justified by the fundamentals. It’s still possible that politicians will mess up the markets (can you say Brexit – or China Trade war?), but we don’t see them killing it in 2019.

2. Protectionist efforts will subside – and that’s a good thing too. As we wrote in our December Update, we are not fans of isolationism by Americans or others (see our comments on Brexit in the April Update). The benefits of the WTO, EU, NAFTA (now USMCA), KORUS (Korea), TPP, etc., far outweigh the risks. Politicians are slowly figuring that out.

3. Volatility will remain high – and that’s not great, as we wrote in our December Fintech m&a report. Innovation can moderate the effects of market swings.

4. Private company valuations will remain strong for middle market InfoTech companies with proprietary products, scale, and strong growth prospects, as we wrote inour August Fintech M&A Update. This rising tide does not lift all boats equally: the weak are not desired and the super-strong have sometimes reached valuations that are not justified by a rational view of the future. But the rest of the market should remain strong in 2019.

5. Pigs will continue to get slaughtered. As we wrote in our February market update, buyers and investors have plenty of money and are willing to pay reasonably strong prices for strong companies with strong management. But, the future is never certain and prices must be justifiable. Economies change, synergies aren’t easy to achieve, customers get to vote, technologies get overtaken, competitors rise etc. Sellers need to have reasonable value expectations in light of the risks– or they will get slaughtered.

6. Chinese InfoTech companies will continue to rise. As we wrote in our January 2018 Enterprise Data and Analytics report, China already has 29 InfoTech “unicorn” firms as well as at least another 54 “future unicorns”. Their market values may moderate, but the Chinese are still coming.

We’re bullish. For the year ahead, we see mostly following seas. We wish you and your families health, contentment, and continued strength in the in the dozen+ segments of the Infotech world that we follow and sometimes lead. A few of the more interesting recent transactions include:

• Plaid (San Francisco, CA) raised $250mm in a Series C funding round led by Mary Meeker of Kleiner Perkins, and included participation from new investors Andreessen Horowitz and Index Ventures, and existing investors Goldman Sachs and Norwest Ventures,
• Temenos (SWX:TEMN) agreed to acquire Avoka Technologies for $245mm,
• Digicert (Lehi, UT) acquired QuoVadis for $45mm. QuoVadis represents the managed PKI business of WISeKey (SWX:WIHN). Marlin & Associates previously advised QuoVadis on its sale to WISeKey. Read more about that transaction here.