Fintech M&A rises as valuations crumble
Global Fintech M&A surged in the first half of 2022 with 591 deals recorded, as bargain hunters look for deals at discounted prices.
Meanwhile, valuations remained stable: 1H2022 saw the trailing 30-month median earnings multiple of 3.1x – broadly in line with levels seen over the past two years.
Miro Parizek, founder and general partner, Hampleton Partners, comments: “Fintech has proven to be a very attractive target for financial and strategic dealmakers, defying the wider global slowdown in mergers and acquisitions.
“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.”
The crypto and blockchain segment saw a significant jump in the number of deals over the past 12 months, with a total of 107 recorded transactions, a 75 percent year-on-year growth.
As blockchain technology enables monetization in the metaverse, companies are flocking to create digital assets. In February, investment firm Republic Realm paid a record $4.3 million for land in Sandbox, currently the largest metaverse platform. In May 2022, US-based Descrypto Holdings acquired OpenLocker, a provider of an online NFT trading portal and marketplace for $11 million.
Open banking is another sector witnessing increased M&A activity, with the number of users expected to quintuple to 64 million consumers by 2024. Embedded finance provided by companies such as Stripe, Clearpay and Clear Bank is also on the rise with transaction values expected to reach $7.2 million by 2030.
Miro Parizek continues: “Many fintech companies raised significant investment capital recently. Some will grow and mature to become serial buyers in their niches. Many other Fintechs will be sellers in what remains an attractive M&A market.
“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 bound to increase overall M&A activity in the fintech sector.”
