Key Trends in Q2 Fintech M&A activity – Payments lead the way

Fintech deal activity hit a peak in Q4 2015, and as discussed in a previous post, steadily went down through most of last year. However, this year after a good start in Q1, there was a strong rebound in Q2 2017, and recent news have been pointing to some big ticket deals happening within the payments space.

As per KPMG’s quarterly report, globally Fintech investments hit a healthy $8.4 Billion across 293 deals. Rebounds were particularly noticeable in both Europe and UK. Fintechs in Europe managed to attract $2 Billion (in investments) in Q2, which is more than double the Q1 number ($880 Million).

VCQ2-1

Some of the key trends from the report,

  • Corporate Venture Capital continue to increase their involvement in Fintech deals
  • Asia sees a dip in Q2 investments due to low China deal activity
  • Regtech deals could create a record year 2017. At the current pace its likely to surpass 2015 and 2016 activity (in size and count)
  • Focus moves from B2C (customer experience) to B2B (mid and back office efficiencies)

VCQ2-2

Apart from the VC activity, Private Equity firms have turned their attention to Payments, as the deal sizes within payments start to increase. In the last eight weeks we have had some M&As and private equity deals announced within payments.

  • Igenico acquires Bambora for $1.5 Billion. This happened after Ingenico tried a hostile takeover of WorldPay assets
  • Worldpay merged with Vantiv with a £9.1 Billion deal. The new firm will be jointly led by Vantiv’s Charles Drucker and Worldpay’s Philip Jansen.
  • Worldline acquires Digital River World Payments and First Data Baltics, giving them operational positions in the Nordics and in the Baltics.
  • Visa invested in Klarna – how much they invested and at what Valuation is not disclosed.
  • Blackstone and CVC announce acquisition of Paysafe for £2.9 Billion

These are some of the top stories, but the key takeaway is that money is flowing the Fintech way, again!! Both in the VC and the PE space!!


Arunkumar Krishnakumar is a Fintech thought leader and an investor. 

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London closes the funding loop by having a big Fintech IPO with Worldpay

By Bernard Lunn

Worldpay had a successful IPO last week on the London Stock Exchange, valuing the business around $7 billion. This places Worldpay about #8 in the Daily Fintech Index (ahead of Lending Club).

A few months ago we wrote that London needs a big IPO success to earn the right to be seen as the Fintech Capital of the World.

Recently it has mostly been bad news on the UK listed Fintech front with Monitise and Tungsten Network. London needed a big success. Worldpay is that big success.

There is no short cut to IPO success. The numbers bar for public investors is very high. Attempts to short cut the process with clever listing gimmicks (reverse mergers, junior markets etc) usually only get you to small cap hell (most investors ignore you). Today the mantra is “grow privately until you are ready, there is plenty of private equity to support that”.

This is being billed as “the largest London listing this year.” This will be big payday for Worldpay’s US private equity owners (Advent International and Bain Capital). They are reported to have earned a combined profit of £3.2bn.

Clearly Worldpay could have gone public on NYSE or Nasdaq. The fact that they chose London is significant.

Worldpay is not the only interesting Fintech story in the UK public markets. Reuters reports that Funding Circle “planned to raise 150 million pounds through the launch of a new London-listed fund that will provide loans to small businesses.

This is NOT Funding Circle going public. The story is more interesting. This is a publicly listed debt fund that is “targeting a dividend yield of 6-7 percent a year. ”

If Funding Circle can deliver that dividend, a lot of cash flow hungry investors – starved by prolonged ZIRP – will find that a pretty attractive yield. Lets see if they can do that.

A year ago I wrote that a big IPO win was one of two things on the UK Fintech to do list. Tick check on one of those items. Or at least a good start.

In that post I wrote that the UK unicorn “still jumps on Virgin Atlantic to go to NY for the IPO. The reason proudly European entrepreneurs go to NY for the IPO is the same reason that Willy Sutton robbed banks – it is where the money is. You need that money and you need the branding event in America.”

If a London IPO means you only get UK investors, it is doomed to be a minor local exchange. There is no reason why US or Asian investors will not buy stocks on LSE. Hedge Funds, Sovereign Wealth Funds and Family Offices (the three big, fast moving pools of capital) are quite comfortable investing globally.

Investors don’t care which exchange they buy and sell on, as long as it is reputable and competitive (LSE clearly scores on both points) and the data is easily accessible. Making the data more accessible is the reason why I keep banging the XBRL drum).

It is a big deal that Worldpay did its IPO before First Data – both are in payments and both were backed by US Private Equity. With a market cap of $20 billion, First Data is bigger than Worldpay (about #6 in the Daily Fintech Public Index), but we can now do valuation comparables across US and UK exchanges and I expect US and Asian investors interested in the payments space to be checking out Worldpay in London. Square IPO may struggle with these comparables.

Daily Fintech Advisers (the commercial arm of this open source research site) can help implement strategies related to the topics written about here. Contact us to start a conversation.