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 February Fintech Market Update.
Clearly, the big deal this month is Blackstone (together with Canada Pension Fund and Singapore’s GIC) buying 55% of Thomson Reuters’ financial information business (commonly referred to as “Reuters”, even though the original Newswire business is not part of the transaction.) At around US$20 billion (including debt), this is Blackstone Group’s largest deal since the financial crisis, and it’s the biggest deal EVER in Fintech. So what does it mean? We see Blackstone and its partners making four big-money bets:
This is a bet on FinTech outsourcing. For 30+ years people have been predicting that financial services firms, which spend billions on internal development, would soon outsource the majority of this effort to 3rd parties such as Reuters. But it has been slow in coming. This is a bet that the FinTech world is changing – driven by increasingly complex regulatory requirements, competitive pressures, and the requirement to meet customer needs with expensive data feeds and mobile-enabled enterprise applications using secure reliable AI, Big Data Analytics, biometrics, cloud, neural networks, SaaS, social media integration and more. It’s too hard to do internally for all but the largest.
This is a bet on b2b. The press may be focused on B2C Fintech, but firms such as Reuters, Bloomberg, Broadridge, Cognizant, Morningstar, FIS, Fiserv, NRI, SS&C, Tata, and a few others are reaping huge rewards while mostly selling to businesses. This is a bet that this very large market will continue to expand.
This is a bet on global. Reuters is one of a handful of FinTech players with global scale. China may have several Fintech “unicorns” (e.g., Ant Financial, Alibaba, JD Finance, and Tencent) but none yet have the global reach of Reuters. This is a bet that leveraging those capabilities will be a lasting differentiating factor.
This is a bet that legacy players can win. Meaning no disrespect to the “disruptors” such as Addepar, Betterment, Credit Karma, Kabbage, Oscar, Stripe, SoFi, Wealthfront, etc., but legacy FinTech players are not asleep. They are acquiring (See JP Morgan’s acquisition of WePay, and PayPal’s acquisition of Xoom); partnering (See Visa’s investment into Klarna); and innovating (See the GS Bank). Reuters has been no exception. These firms are saying to us “… just watch how our new products perform, wait until the next economic downturn, and we’ll see who the winners will be.”
As you will see in the report found here, m&a values in this space continue to rise. Some of the more interesting transactions this month include:
•Private equity funds managed by The Blackstone Group (NYSE:BX), Canada Pension Plan Investment Board and GIC Pte agreed to acquire a 55% stake in the Financial & Risk business of Thomson Reuters, valuing the business unit at $20bn,
•SS&C (NASDAQ:SSNC) agreed to acquire DST for $5.7bn, valuing the company at an implied 2.5x LTM revenue and 11.1x LTM EBITDA,
• Silver Lake and P2 Capital Partners agreed to acquire Blackhawk for $3.5bn, valuing the company at an implied 1.8x LTM revenue and 25.4x LTM EBITDA,
•ING (ENXTAM:INGA) agreed to acquire a 75% stake in Payvision for €270mm (~$333mm), implying an enterprise value of €360mm ($444mm).