Global fintech mergers and acquisitions (M&A) rose significantly in the first half of this year to buck a wider M&A slowdown, according to research by financial advisory firm Hampleton Partners.
According to the latest Hampleton Partners’ Fintech M&A Report, while global M&A has suffered, the fintech sector saw 591 deals recorded in the first half of 2022 – a 15 per cent increase on 2H2021 and a massive 68 per cent increase on pre-pandemic (2019) figures.
Meanwhile, valuations remained broadly in line with the levels seen in the past two years. Unlike during the 2008 recession, deployable private capital reached its highest ever level at $3.6trillion – around three times that of 2008.
Miro Parizek, founder and principal partner, Hampleton Partners, suggests why fintech is proving to be a very attractive target for financial and strategic dealmakers,.
He says: “As for the impact of any potential recession, there is one major difference between now and the previous real recession of 2008. This year, deployable private capital, including buyout, VC, growth and real estate, hit its highest level in history at $3.6trillion – three times the figure in 2008.
“The availability of capital is driving buyers and investors to increase their acquisitions at a time when their pockets are full and high-growth fintech companies are being sold at all-time affordable prices. Any potential recession won’t dampen fintech M&A as it did in 2008.”
The crypto and blockchain segment experienced an impressive jump in the number of deals in the past 12 months, with a total of 107 transactions recorded – up 75 per cent year over year. Digital banks are increasingly offering crypto-compatible payment services while blockchain technology market is expected to grow to $23billion by 2026.
In February, investment firm Republic Realm secured $4.3million of land in Sandbox, the largest metaverse platform. While in May, US-based Descrypto acquired OpenLocker, a provider of an online NFT trading portal & marketplace for $11million.
Just over half of all deals in the past 30 months targeted a North American firm. European targets were involved in 29 per cent of the transactions during the same period.
While over two-thirds of these were purchased by acquirers on the same continent, 32 per cent of the European fintech sellers ended up transacting intercontinentally.
According to the report, many other fintechs will be sellers in what continues to be an attractive M&A market.
Parizek says: “Many fintech companies raised significant investment capital recently. Some will grow and mature to become serial acquirers in their niches. As increasing numbers of private fintech companies run out of money needed to fuel and maintain their operations, their options will be to raise capital from venture capital firms; sell to private equity or strategic acquirers; or entirely shut down business operations. These options make a sale appear attractive.
“At the same time, public companies with massive capital and PE with large amounts of dry powder, well financed late-stage high-growth private companies, and traditional financial services companies looking to remain relevant, are on the lookout for good assets in the sector. These two sides of the equation are bound to increase overall M&A activity in the fintech sector.”