Incumbent-fintech battle yields record M&A led by Fidelity, Broadridge

The latest Fintech M&A market report from Hampleton Partners shows that 2019 shifted towards blockbuster M&A transactions, historically high deal count levels and impressive valuations.

2019 proved to be the second richest of the decade in terms of fintech M&A activity, with 439 transactions and a disclosed transaction value of over $130 billion – almost twice the largest disclosed value recorded to-date ($71 billion in 2018). Valuation multiples continued their rapid climb in the second half of 2019: the trailing 30-month median revenue multiple peaked at a record 3.8x, while the EBITDA multiple jumped to a whopping 17.3x, just shy of the record set in H1 2015.

Jonathan Simnett, director, Hampleton Partners, said in a statement: “Traditional financial players are battling for relevance and scale – relevance being the ability to offer solutions that are ubiquitously available and in demand; and scale referring to the number of customers incumbents can gain and retain in the face of non-traditional competition. The new battleground requires new capabilities and incumbents must adapt and acquire now, or they will decline later.”

In 2019, four enormous M&A deals at $101 billion set the record for the largest transactions ever recorded in fintech history: Fidelity’s acquisition of Worldpay ($44 billion); Fiserv’s acquisition of First Data ($22 billion); the merger of Global Payments with Total System Services ($21 billion); and London Stock Exchange Group’s acquisition of Refinitiv ($14 billion).

Source: Hampleton Partners

Specific to the enterprise financial software subsector, Broadridge remains the frontrunner with seven fintech acquisitions in 2019, more than tripling its count in the sector since last year. This buying spree has focused solely on software acquisitions for the investment and lending sectors, with the most recent being ClearStructure, a global provider of portfolio management solutions for the private debt markets.

Simnett’s outlook for 2020 is that fintech M&A globally is expected to remain a hot sector, particularly given the large M&A deals that have taken place so far this year (. The payments vertical will no doubt receive an abundance of investment, while insurtech, regtech, wealthtech and B2B platform services are all well-positioned for growth.

“Fintech investors are, and will continue to be, very selective in deploying capital, favoring larger, more promising fundraises and moving away from the “spray and pray” approach of the early stages of the sector.

“Meanwhile, with large technology companies knocking at their doors, incumbent financial institutions must continue to engage aggressively with fintech disruption, whether by building their own capabilities; by partnering; or by acquiring, given the pace of innovation in the sector.”

Access the full report

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