Dear Clients and Friends,
Our latest Fintech m&a report can be found here. It highlights m&a trends and transactions in the seven segments of the Fintech world that we follow, and sometimes lead. Please click here for our November Fintech Market Update.
There is a revolution going on in many areas of Fintech. It’s obvious to anyone who uses their smart phone for banking, uses Alipay, PayPal, or Venmo to make online payments; uses ApplePay or LevelUp for mobile purchases; knows about crypto-currencies such as Bitcoin and Etherium; or about Kabbage, OnDeck or others doing business lending; or about our client, BillingTree, for managing b2b collections; or Prosper, LendingClub and China Rapid Finance for Peer-to-Peer lending. It’s everywhere – except in capital markets.
Some will argue; they will point out that Wealthfront, Nutmeg, Betterment and other robo-advisers are “revolutionizing” asset management. Yes, but the impact feels more evolutionary. Some may note the scores of firms offering SaaS, PaaS and cloud-based capital markets solutions. True, but their market share is small. Some point to firms applying AI to “Big Data” and making trading decisions in real time. True, but we had algo-traders in the 1980s. So why does Capital Markets feel like the forgotten stepchild of Fintech?
We think the revolution may be finally coming – soon – and there are four drivers:
- Competitors are putting pressure on profits and that makes institutions more willing to look for innovative ways to grow revenue – or gain efficiencies.
- Regulators are pushing for better risk management and more transparency – which are both tough to accomplish in firms with bureaucratic silos of information that are technologically incompatible.
- Technology allows more creative solutions: Cloud storage has matured; SaaS and PaaS applications are proliferating; Big Data is here, AI is coming. But the real game changer is Distributed Ledger Technology (Blockchain). TabbGroup tells us that more than 30 major institutions are within two years of DLT implementation.
- Vendors such as Fenergo, OpenGamma, Trunomi and Xignite are using these technologies to offer innovative solutions to capital markets participants as are companies like ComplyAdvantage, Earnix, InvestCloud, iSentium, Ripple, Tradair, Axoni and others.
The combination of these drivers is spurring some highly visible changes to Capital Markets technology. We enjoy working with companies at the forefront of this effort. It’s fun; it’s historic; and it’s affecting m&a values and trends.
As you will see in the report found here, demand for Fintech firms fomenting this revolution is strong. A few of the more notable recent deals include:
- First Data (NYSE:FDC) agreed to acquire BluePay for $760mm,
- TMX Group (TSX:X) agreed to acquire Trayport from Intercontinental Exchange for $721mm, valuing the company at an implied 9.5x LTM revenue and 18.3x LTM EBITDA,
- Intercontinental Exchange (NYSE:ICE) agreed to acquire BondPoint from Virtu Financial for $400mm,
- E*Trade Financial Corporation (NASDAQ:ETFC) agreed to acquire Trust Company of America (TCA) for $275mm,
- Fintrax Group agreed to acquire Planet Payment, (NASDAQ:PLPM) for $220mm, implying an enterprise value of $249mm, valuing the company at an implied 4.7x LTM revenue and 20.5x LTM EBITDA.
Also, we are pleased to announce that this week, the M&A Advisor, a conference producer and newsletter publisher serving the middle-market finance industry, recognized Marlin & Associates as the winner of the “Professional Services (B-to-B) Deal of the Year Award” (Over $100MM) for advising BillingTree, the leading provider of integrated payment solutions to the healthcare and financial services industries in a majority recapitalization led by Parthenon Capital Partners in partnership with BillingTree’s senior management team. We are always pleased when our hard work is recognized by our peers. Please find more of our awards here.