IMAPINSIGHTS FEBRUARY 2021 - OUR M&A PERSPECTIVE ON THE GLOBAL
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IMAP INSIGHTS
FEBRUARY 2021
OUR M&A PERSPECTIVE
ON THE GLOBAL
FINTECH SECTOR
Contents
Themes Driving Fintech Disruption 4
North American Fintech 6
African Fintech 8
Fintech Road Ahead 10
Fintech and Financial Services
Intersection 12
IMAP Financial Services Transactions 14
About IMAP 16
IMAP
International M&A Partners
2 3
INTRODUCTION
IMAP Fintech Sector Leaders: Andrew Kemper, David Francione, and
Edmund Higenbottam share insights into the global Fintech sector.
They look at the short- and long-term effects of the COVID pandemic
and which subsectors stand to lose and who ultimately stands to
benefit. Sharing their thoughts on key themes disrupting the sector,
including payments, digitalization, lending and mobile, they examine
how these have been impacting M&A activity and valuations.
They provide an overview of the most active players, as well as
expectations for this key sector moving forward.
Fintech is a large growing vertical in
the TMT Software market. In the first
half of 2020 we saw a decline in activity
compared to the same time period in 2019,
but in Q3 there was a pick-up and Q4 deal
volumes returned to pre-COVID levels. While
cross-border transactions have been limited
due to the pandemic, we expect this to
increase moving forward as companies look
to access new markets, internationally as
ANDREW KEMPER
well as domestically. Companies acquiring
complementary solutions to increase
platform capabilities will also drive activity.
Likewise, global companies are accelerating
the strategic shift to automating the
movement of money.
In terms of buyer mix, we are seeing active
buyers across the board, from early and
later stage VCs, growth, public companies,
and growth equity, to later stage buyout
OUR M&A PERSPECTIVE
and public companies, as well as SPACs
DAVID FRANCIONE who play a significant role in the Fintech
sector. During the last 5-7 years, more PE
dollars have been invested and we are also
ON THE GLOBAL
seeing more Corporate VCs. Traditionally in
the Fintech sector, these are companies
and organizations without inhouse capacity
to develop the more advanced technology
required quickly enough, and need to acquire
FINTECH SECTOR
it, who have created their own investment
departments to accelerate time to market.
Insurance companies and banks who are
also unable to develop technologies quickly
enough, have been forced to step up their
EDMUND HIGENBOTTAM M&A activity and investment plans.
IMAP
4 THEMES DRIVING FINTECH DISRUPTION THEMES DRIVING FINTECH DISRUPTION 5
FINTECH M&A
THEMES DRIVING FINTECH DISRUPTION
Typically, Fintech, including at a staggering USD 120 trillion. B2C Payments are somewhat
payments, is divided into B2B Interestingly, in the US, there are a large harder to gauge, due to the B2B2C
and B2C, as well as secondary number of legacy banks, antiquated convergence, but these are estimated
convergence between the two; B2B2C. technology, different processes and to have an annual global revenue of
regulations than the rest of the world, USD 30 trillion, less than 10% of which
If we look at the peer B2B payments resulting in countless payments in B2B are digital payments.
annual global revenue, it stands still made in paper/manual checks.
Payment, Digitalization, Lending & Mobile
B2B Payments – USD 120 trillion Global/Yr B2C Payments – USD 30 trillion Global/Yr
US Market – USD 25 trillion (50% checks)
6 NORTH AMERICAN FINTECH NORTH AMERICAN FINTECH 7
NORTH AMERICAN FINTECH M&A NORTH AMERICAN FINTECH VALUATIONS
M&A LANDSCAPE M&A Activity: Fintech VALUATIONS ARE BACK TO Bank Technology – Valuation Multiples
Fintech is a large growing vertical PRE-COVID LEVELS
in the TMT, Software market. Compared Leading activity in terms of volume and value are bank 35x 32.9x
to 2019, we saw a decline in Fintech M&A 300 technology and payment technology providers, with 30.9x
Number of Transactions
activity in the first half of 2020. In Q3, we predominately recurring values – be it subscription-based 30x
250
saw this pick-up due to pent up demand 196 190 194 189 191 format or payment processing volume.
200 25x 23.5x
165 152
and Q4 returned to pre-COVID levels. 137 136
150
Revenue multiples are trading relatively high and whilst 20x
The Payments segment levelled off, yet 100 bank technology has been consistent, there has been a 14.9x
50 15x
remained robust throughout the COVID slight uptick in payment technology providers. This growth
pandemic seeing an uptick, as less and has been accelerated by the events of the COVID pandemic 8.4x 9.2x
0 10x 7.8x
7.0x
less people are inclined to use cash, and 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 and subsequent increase in the number of electronic
less companies accept cash payments. payments driving higher YOY growth rate and gross profit 5x
This trend has benefited electronic margins, which has driven up multiples. 0x
payment companies. Another global trend 2015 2017 2019 2020
in B2C is the use of mobile applications, Fintech IPOs are also trading at extremely high multiples,
as people increasingly use their mobile M&A Activity: Payments Segment Breakdown consistent with the Software sector.
EV / Revenue EV / EBITDA
devices for everyday activities, especially
payments for goods and services. Should 200
the pandemic continue to worsen, brick Payment Technology Providers – Valuation Multiples Recent FinTech IPOs
Number of Transactions
160 147
and mortar type customers of payment
processing businesses will likely experience 35x 30x 27.4x
120 96 96 30.3x
a significant decline in payment volume,
75 30x 25x
whereas e-commerce payment businesses 80 63 60
49 24.1x
will thrive. 31 26 25x
40 21 21 19 15 21.0x 20x
13 11 9
Leading the way in terms of number of 20x
15.6x 15x 13.8x
0 12.0x
transactions, are card-related payments, 15x 11.5x 9.2x
Ga ate nts
ay s
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BUYER MIX 5x
5x
at
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Across the board, we are seeing active
l
0.0x
-re
vo
rd
In
buyers, from early and later stage VCs, 0x 0x
Ca
growth, public companies, and growth 2015 2017 2019 2020 2015 2017 2019 LTM
equity, to later stage buyout and public EV / Revenue EV / EBITDA EV / Revenue EV / EBITDA
companies, as well as SPACs who play a
significant role in the Fintech sector.
M&A Activity: Payments Segment Source: Capital IQ, PitchBook, and Capstone Research
In the last 5-7 years, more PE dollars have
been invested and we are also seeing 100
more Corporate VCs. Traditionally in the
Fintech sector, these are companies and 80
Number of Transactions
organizations without inhouse capacity to 62 61
55 55 55 57
develop the more advanced technology 60 54
50
required quickly enough, and need to 45
acquire it, who have created their own 40
investment departments to accelerate time
to market. Insurance companies and banks 20
who are also unable to develop quickly
technologies quickly enough, have been 0
forced to step up their M&A activity and
4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
investment plans.
Source: Capital IQ, PitchBook, and Capstone Research
IMAP
8 AFRICAN FINTECH AFRICAN FINTECH 9
FINTECH IN AFRICA & EMERGING MARKET AFRICA & EMERGING MARKET KEY
FINTECH TRANSACTIONS & THEMES
Key Themes Transaction Dynamics
Financial Inclusion
4 66% of adults in sub-Saharan Africa are unbanked 4 Growth of companies using technology to expand
or underbanked access to financial services, payments (e.g., mobile
money, app solutions, agency) or credit (scoring
4 25% of adults in the US are unbanked or
algorithms)
underbanked
4 Growth of “Impact Investing” into a “mainstream”
asset class
Technology Adoption vs Disruption
4 Incumbents benefiting from regulatory status, brand, 4 Acquisition of tech savviest by incumbents (e.g.,
and reputation in the funding market Network International buying DPO)
4 Disruptors benefiting from tech savvy DNA and lack 4 Capital hungry disruptors
M&A LANDSCAPE
In Africa and the emerging
seeing a large number of traditional PE
competing with VC. In some of these Africa is the Fintech of legacy systems
market, Fintech is more broadly
defined, to include technology
transactions, we are seeing a variety of
quasi-VC within banks. fulcrum between
driven businesses that are disrupting
traditional Financial Services, i.e., the In terms of regional parties East and West Digital Termination of Remittances
disruptors, as well as the technology participating in transactions, this
providers to banks, or enablers. stands at around 2/3 global players,
Furthermore, the bulk of M&A activity compared to 1/3 regional and is fairly 4 Global remittance volumes expected to reach USD 1 4 Leverage DTR to build broader mobile financial
and capital raising is undertaken by consistent across the subsectors. We trillion in 2026 services businesses
the disruptors, as opposed to the are seeing that the larger transactions also in terms of geopolitics, business 4 Disruption by digital models, reducing transaction costs 4 Payment channel for cross-border commerce with
enablers. are disproportionately global investors and natural resources is a fulcrum (average 7% of value) and enhancing convenience regions
– a small deal may have only a regional geography between China and the US,
4 Additional axe for global interest in EM assets
There has been a relatively strong investor, but large transactions and similarly to LATAM and other parts
bounce back in terms of deal volumes, are likely to have an international of the world. Therefore, we expect to
with some shift towards M&A, though component. see an increase in activity in Africa
there has been less activity on the from China over the next 2-3 years.
financing side due to a more select VALUATIONS
market over the last 12 months. There isn’t the same conveyor belt KEY GROWTH AREAS West vs East
of funding available in Africa so In Africa, some synergy can be found
Excitement in Fintech in Africa having companies find themselves forced between Fintech activity focused
begun some 4/5 years ago, we are to be profitable and mature sooner. on fraud avoidance and customer 4 Mastercard invests in Network International 4 Competition - East vs West for “strategic assets”
now seeing the best companies ready Luckily, with lower operating costs, it’s payment method convenience, with 4 Stripe acquires Paystack (YC-alumni) for USD 200 4 Exit optionality holds up valuations of VC rounds
to exit, whereas the weaker companies easier for companies to break even new technologies being developed million
are no longer able to continue capital earlier. that encompass both. There is
4 Pine Labs sold to Mastercard
raising. however, one space in Africa where
GEOGRAPHY the interest in transactions is as 4 Ant targets IPO (USD 35 billion) larger than Aramco!
BUYER MIX We see some level of competition much around enabling incumbents,
As in the North American market, from East to West in terms of strategic as opposed to disruption, which is
there is a broad mix of players. We are assets. Africa, not just in Fintech, but prevention in KYC technologies.
IMAP
10 FINTECH – THE ROAD AHEAD FINTECH – THE ROAD AHEAD 11
FINTECH – THE ROAD AHEAD
There has certainly been a global to-face meetings which are still very ▪ Online insurance, especially in
increase in Fintech activity, with important due to cultural differences the US, has seen an increase
some key trends driving growth. are challenging. As such, many in activity and this market is
companies are currently unable to expected to continue to grow
▪ Companies look to start building travel overseas, essentially having to – both personal and business
their businesses and go to market push the pause button. insurance.
strategies overseas, in the hopes
that the regulatory environment may ▪ Countries such as South America ▪ Online brokerage is a growing
be more flexible. and Western Europe are increasingly market. Due to the COVID
interested in the US market. pandemic, many 18–30-year-olds
▪ Borders are becoming increasingly are now trading stocks from home
less important in the Fintech market, ▪ Due to a high level of Venture and digital brokers have captured
so we expect an increase in the level Funds around the world and a good segment of the market. The
of cross-border activity – both for strategics looking to buy, buyout market is large and has become
M&A and capital raising – though or buy into Fintech, there are many less touchy-feely and more tech
the COVID pandemic means face- opportunities for global deals. driven.
Fintech M&A Landscape Recap
M&A Drivers for Buyers
Expectations and Sellers
4 Global companies accelerating strategic shift to 4 Access to new markets, domestically and
automating the movement of money; strong YOY internationally
revenue growth and ahead of projections
4 S. America (LATAM), W. Europe, India in focus
4 Weak spots: end users negatively affected by
COVID – airlines, hospitality, restaurants, brick & 4 Complementary solutions that increase platform
mortar retail capabilities
Transactions, Valuations Due Diligence, Transaction
& Trends Structure & Risk Sharing
4 Number of deals declined 4 Expected/on going use of earn-outs based on the
achievement of forecast results in order to match
4 Size of deals impacted - less USD billion the bid/ask gap & manage downside risk due to
transactions, more tuck ins and smaller deal sizes unknown COVID impact going forward
4 Cross-border transactions soft – due to cultural 4 Still able to sell off next years earnings projections
differences related to deal dynamics; stay at home & often based on multiple of recurring revenue
IMAP
12 FINTECH & FINANCIAL SERVICES INTERSECTION FINTECH & FINANCIAL SERVICES INTERSECTION 13
FINTECH & FINANCIAL SERVICES
INTERSECTION
Fintech is becoming a part of financial services companies, such of a digital entity, adopting more and
consumers daily lives. As such, as banks, investment firms and more technology driven systems and
during the last few years, we have seen brokerage companies, who through applications in order to stay relevant in
convergence between the traditional a paradigm shift are becoming more the marketplace.
C Blo
2 ck
/B Risk ch
B Management Loan Management
ai
B2
n
Trading Analytics Digital / Mobile Banking
Secutities
Trading PayFac
Capital
Banks
Markets
Gateway Risc
aaS
Assessment
POS Payments Insurance / Analytics
S
Processor
b il e
Asset
d /
Acquiror / Issuer Mgt Predictive
u
Mo
Analytics
o
Payment
Cl
Platform
Fraud Credit
Detection Monitoring
Risk Management
AI
IMAP
14 IMAP FINTECH TRANSACTIONS IMAP FINTECH TRANSACTIONS 15
IMAP TRANSACTIONS – FINTECH
Selected IMAP Transactions
has been acquired by has been acquired by has been acquired by has divested its subsidiary has been acquired by
Buy side advisory
a portfolio co. of
ADVISOR TO LANTERN ADVISOR TO MHC ADVISOR TO CR SOFTWARE ADVISOR TO WEX ADVISOR TO BANKTEL ADVISOR TO RDM
USD 16 M USD 13 M USD 6 M USD 4 M
has been acquired by has been acquired by
Debt Series A
Series A and Debt Pre-Series A and Debt
ADVISOR TO SIB ADVISOR TO APS ADVISOR TO TUGENDE ADVISOR TO PLANT42 ADVISOR TO RETAIL CAPITAL ADVISOR TO ZEEPAY
IMAP
16 ABOUT IMAP ABOUT IMAP 17
ABOUT IMAP
INTERNATIONAL MERGERS & ACQUISITION PARTNERS GLOBAL REACH
Consistently ranked among the Top 10 middle market M&A advisors worldwide Our cross-border experience extends across Europe, the Americas, Asia and Africa
450+ 47 60+ $12.5bn 450+ 43 60+
TEAM OF IMAP YEARS OF M&A OFFICES IN 43 CLOSED DEAL PROFESSIONALS COUNTRIES OFFICES
PROFESSIONALS EXPERIENCE IN THE COUNTRIES VALUE 2020 WORLDWIDE
WORLDWIDE MIDDLE MARKET
ENTREPRENEURIAL SPIRIT MIDDLE MARKET FOCUS GLOBAL REACH EXECUTION EXPERIENCE
• IMAP is a partner-driven, client- • Sell-side advisory for primarily • Proven cross-border advisory • IMAP has closed over 2,100
focused and independent M&A privately held companies and practice. transactions valued at $90
advisory. spin-offs from large groups. • Global sector & project teams billion in the last 10 years.
• Senior experience and hands • Strategic acquisitions for across 15 sector groups.
on involvement in deals – international corporates. • Leveraging local knowledge
230 Senior Transaction/ • “Sweet –spot” Transaction and corporate access in all
Transaction Advisors. Values $20 – 250 million. relevant international markets.
• Worldwide IMAP team • Strong PE and Family Office
comprising 450+ Coverage.
professionals.
GLOBAL PERFORMANCE 2020
218 $12.5bn 30% 6th
M&A TRANSACTIONS TRANSACTION VALUE CROSS-BORDER DEALS IN THE WORLD
Automotive
Transport Building Products & Services
& Logistics GLOBAL
PERFORMANCE
Technology 6% 4% 5% Business Services 1 PwC
North America New York Latin America Ivory Coast Europe Portugal
14% 9% 2 KPMG
U.S.A. Philadelphia Argentina Mauritius Belgium Russia
3 Deloitte
Consumer
Boston Richmond Brazil Morocco Bosnia & Herzegovina Serbia
4 Houlihan Lokey
& Retail Chicago San Diego Chile Nigeria Croatia Slovakia
Real Estate 5% DEAL 9% 5 Rothschild
Dallas San Francisco Colombia Senegal Czech Republic Slovenia
DISTRIBUTION 6 IMAP
Denver St Louis Mexico South Africa Finland Spain
BY SECTOR Education 7 EY
Materials, 6% 4% 8 Oaklins
Detroit Tampa Peru France Sweden
Chemicals & Training Greenville Washington DC Panama Asia Germany Turkey
& Mining 5% 9 Goldman Sachs
Greenwich Canada China Hungary United Kingdom
Energy 10 Lazard
12% 7% & Utilities
Houston Toronto Africa India Ireland
Ranking based on number of transactions Los Angeles Vancouver Congo Japan Italy
7% 7% closed in 2020. Undisclosed values and Naples Egypt Thailand Netherlands
Industrials
Financial Services values up to $500 million. Ghana Poland
Source: Refinitiv and IMAP internal data.
Food & Beverage
Healthcare
IMAP
18 GLOBAL IMAP FINTECH & FINANCIAL TEAM GLOBAL IMAP FINTECH & FINANCIAL TEAM 19
IMAP GLOBAL SECTOR COVERAGE
FINTECH & FINANCIAL SERVICES
CANADA CANADA PORTUGAL IRELAND FRANCE GERMANY ITALY POLAND
ANDREW KEMPER BRENT WALKER GONCALO VAZ BOTELHO JONATHAN DALTON FRANCK CEDDAHA PETER A. KOCH DANIELE SOTTILE PIOTR CHUDZIK
Partner Managing Director Managing Partner & CEO Head of Corporate Finance Managing Partner Managing Director Managing Partner Managing Partner
Capital West Partners Morrison Park Advisors Invest Corporate Finance Key Capital Degroof Petercam France IMAP M&A Consultants AG Vitale & Co. Trigon,
Vancouver, Canada Toronto, Canada Lisbon, Portugal Dublin, Ireland Paris, France Mannheim, Germany Milan, Italy Warsaw, Poland
andrew.kemper@imap.com brent.walker@imap.com goncalo.botelho@imap.com jonathan.dalton@imap.com franck.ceddaha@imap.com peter.koch@imap.com daniele.sottile@imap.com piotr.chudzik@imap.com
USA USA HUNGARY CROATIA & SEE
DAVID FRANCIONE KHELAN DATTANI MARTON MICHALETZKY GORAN POPOVIC
Managing Director Managing Director Managing Partner Partner
Capstone Headwaters Capstone Headwaters Concorde MB Partners IMAP Southeast Europe
Boston, USA Washington DC, USA Budapest, Hungary Zagreb, Croatia
david.francione@imap.com khelan.dattani@imap.com marton.michaeltzky@imap.com goran.popovic@imap.com
MEXICO BRAZIL COLOMBIA INDIA
GILBERTO ESCOBEDO TOM WASLANDER MAURICIO SALDARRIAGA ASHUTOSH MAHESHVARI
Partner Managing Partner Partner Managing Director
Serficor Partners Brasilpar Inverlink SAS IMAP India,
Mexico City, Mexico Sao Paulo, Brazil Bogota, Colombia Mumbai, India
gilberto.escobedo@imap.com tom.waslander@imap.com mauricio.saldarriaga@imap.com ashutosh.maheshvari@imap.com
PERU ARGENTINA MOROCCO EGYPT SOUTH AFRICA
CARLOS A. GARCIA MARIO HUGO AZULAY ABDELLATIF IMANI KHALED EL GHANNAM EDMUND HIGENBOTTAM
Founder & Managing Partner Partner Partner Chairman Managing Director
SUMMA Asesores Financieros Mario Hugo/FS Partners Ascent Capital Partners Intelligent Way Capital Partners Verdant Capital
Lima, Peru Buenos Aires, Argentina Casablanca, Morocco Cairo, Egypt Johannesburg, South Africa
carlos.garcia@imap.com mario.azulay@imap.com abdellatif.imani@imap.com khaled.elghannam@imap.com edmund.higenbottam@imap.com
IMAPReport Contributors
ANDREW KEMPER
Partner
Capital West Partners – IMAP Canada
andrew.kemper@imap.com
DAVID FRANCIONE
Managing Director
Capstone Headwaters – IMAP USA
david.francione@imap.com
EDMUND HIGENBOTTAM
Managing Director
Verdant Capital – IMAP South Africa
edmund.higenbottam@imap.com
Contact:
IMAP, Inc.
Balmes 151, 1st floor
08008 Barcelona - Spain
T. +34 936 026 710
www.imap.com
© IMAP, Inc. 2020
IMAP
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