AltFi Insights: Why Fintech M&A activity hit record $112bn in first quarter, despite slowing global economy

By Roger Baird on Monday 13 May 2019

Alternative LendingDigital BankingSavings and Investment

Buyout deals charged ahead in three months of the year buoyed by Fiserv’s takeover of First Data and Fis’ acquisition of Worldpay.

AltFi Insights are articles where we analyse, unpack or exclusively reveal something new happening in peer-to-peer finance, fintech or crypto.

Investor’s appetite for fintech firms remains undimmed with mergers and acquisitions hitting a record $112bn in the first three months of the year, despite signs of a slowing global economy and the threat of a disorderly Brexit in the UK.

This figure, spread over more than 250 deals, is already within touching distance of last year’s total M&A volume of $126bn and the sector’s all-time high of $138.3bn, according to US fintech focused investment bank Financial Technology Partners.

Across the year the sector is forecast to hit record mergers and acquisitions volumes as well as the industry’s second highest financing levels, despite the threat of a trade war between the US and China.

The sector was driven by the two largest ever fintech deals in the period - Wisconsin financial technology provider Fiserv’s $41bn all stock acquisition of Atlanta payments firm First Data and the Florida’s FIS $43 bn takeover of London-based payments processor Worldpay in a cash and shares deal.

These firms are both profitable, however, the majority of fintech firms, founded in the wake of the financial crisis are loss-making and are competing to add users, which they later hope to turn into profitable customers.

UK deals lead global transactions

However, these firms continue to attract billions from investors who believe this wave of firms can emulate Big Tech giants such as Facebook and Google.

The industry also saw investors around the world put up $10bn to finance fintech ventures in the first three months of the year, the fifth highest quarter of investment since 2009 said Financial Technology Partners.

The three largest transactions in the period saw British online business lender OakNorth, raise $440m from private equity, Belgian settlement house Euroclear raised $318m after the London Stock Exchange snapped up a 4.9 per cent stake, while German online bank N26 attracted $300m of investment led by Singapore investment vehicle GIC.

Financial Technology Partners said: “The banking and lending technology sector has been the most active in terms of the number of financings so far in 2019 [124 deals] and has had the highest financing volume [$4.8bn].”

Overall, the global mergers and acquisitions activity could hit $448bn this year, dwarfing the $126bn total 12 months ago, although the first three months of 2019 have been inflated by two of the largest ever deals in the industry.

Worldwide fintech financing in 2019 is forecast to come in at  $39.9bn, the second highest year for the sector, behind last year’s record $54.1bn.

Slowing global momentum

This contrasts with the gloomy global growth for 2019 presented by the International Monetary Fund (IMF).

In April, the body said the world economy will grow by 3.3 per cent this year, down from its 3.5 per cent January forecast, and is its lowest global outlook since the 2008 financial crisis.

The IMF said: “Amid waning global growth momentum and limited policy space to combat downturns, avoiding policy missteps that could harm economic activity needs to be the main priority.”

Financial Technology Partners database records the activity of more than 33,000 fintech companies around the world and 10,000 private equity and venture capital firms.

AltFi Insights are articles where we analyse, unpack or exclusively reveal something new happening in peer-to-peer finance, fintech or crypto.

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