Fintech M&A on the rise driven by crypto and blockchain

Global fintech mergers and acquisitions (M&A) increased significantly in the first half of this year to offset a larger decline in M&A, according to research by financial advisory firm Hampleton Partners.

According to the last 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 – an increase of 15 percent from the second half of 2021 and a massive 68 percent increase on pre-pandemic (2019) figures.

Meanwhile, valuations remained largely in line with the levels of the past two years. Unlike during the 2008 recession, deployable private capital reached an all-time high of $3.6 trillion—about three times higher than in 2008.

Miro Parizekfounder and lead partner, Hampleton Partners, suggests why fintech is proving a very attractive target for financial and strategic dealmakers.

He says: “In terms of the impact of any potential recession, there is one big difference between now and the last real recession in 2008. This year, deployable private capital, including buyouts, VC, growth and real estate, reached an all-time high of 3 .6 trillion dollars – 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 lows. A possible recession will not dampen fintech M&A as it did in 2008.”

New technology

The crypto and blockchain segment saw an impressive jump in the number of deals over the past 12 months, with a total of 107 recorded transactions – up 75 percent year-on-year. Digital banks are increasingly offering crypto-compatible payment services, while the blockchain technology market is expected to grow to $23 billion by 2026.

In February, the securities firm Realm of the Republic secured $4.3 million land i Sandbox, the largest metaverse platform. While in May, US-based Decrypto acquired OpenLocker, an $11 million provider of an online NFT trading portal and marketplace.

Regional focus

Just over half of all agreements in the last 30 months were aimed at a North American company. European targets were involved in 29 percent of the transactions in the same period.

While over two-thirds of these were purchased by buyers on the same continent, 32 percent of European fintech sellers ended up trading intercontinentally.

Healthy future

According to the report, many other fintechs will be sellers in what is still an attractive M&A market.

Parizek says: “Many fintech companies raised significant investment capital recently. Some will grow and mature to become serial buyers in their niches. As a growing number of private fintech companies run out of cash needed to run and sustain operations, their options will be to raise capital from venture capital firms; sell to private equity or strategic acquirers; or completely shut down the business. These options make a sale seem attractive.

“At the same time, public companies with massive capital and PE with large amounts of dry powder, well-funded late-stage high-growth private companies and traditional financial services companies that want to remain relevant are looking for good assets in the sector. These two sides of the equation are sure to increase overall M&A activity in the fintech sector.”