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 August Fintech Market Update.
One of those trends we have previously noted is that we are in a “strong” m&a market – especially for Fintech companies. As you can see in our report found here – it’s true – sort of. Transaction multiples certainly are up – for many companies – but not for all. And that’s the rub. Everyone seems to believe that they are above average.
As anyone who has studied economics will tell you, price is a function of supply and demand – only. All the rest is noise. The supply of strong Fintech companies looking for liquidity events is limited; the demand for them is high and that leads to strong prices – for those firms. Demand in this market is driven by many factors including financial sponsors that see investing in strong Fintech companies as one of the best ways to get high returns for their investors – and are sitting on something like $1 Trillion in unspent committed capital; and industry participants (“strategics”) that are sitting on at least that much capital – and looking for ways to improve revenue and profit, penetrate new markets, and gain (or at least hold onto) market share in the face of the new disruptive technologies and consumer expectations. Demand is abetted by banks and others willing to provide m&a financing at attractive rates and terms. All this leads to strong prices – for some Fintech companies.
This rising tide is not lifting all boats (or all Fintech companies). Firms (yes, even Fintech firms) that have not yet reached scale, are not growing quickly, and/or rely on last century’s technologies and revenue models seem chained to the ocean floor. The rising tide just swamps them. They command far less interest (demand) and therefore far lower prices than firms that have reached scale, use modern proprietary technology, have a strong franchise in a large and growing niche, employ a recurring revenue model, and are experiencing strong top-line growth. But for those Fintech companies that do have these characteristics, the market is indeed very strong.
This rising tide has been good for our business – as we know many strong Fintech companies around the world and we enjoy advising them as they seek to buy, sell or raise capital. More information on the trends, transactions and m&a values in the seven segments of the Fintech world that we follow and sometimes lead can be found in the following report.
A few of the more interesting recent transactions include:
- State Street (NYSE:STT) agreed to acquire Charles River Systems for $2.6bn, valuing the company at an implied 8.4x LTM revenue and 17.4x LTM EBITDA,
- SS&C (NASDAQ:SSNC) agreed to acquire Eze Software for $1.45bn, valuing the company at an implied 5.2x LTM revenue and 13.8x LTM EBITDA,
- EQT Partners agreed to acquire Banking Circle (Hellerup, Denmark) from Saxo Bank for Kr. 2.0bn (~$300mm),
Tenable (NASDAQ:TENB) raised $250mm in its IPO, valuing the company at $2.35bn, an implied 11.4x LTM revenue,
- Next Insurance (Palo Alto, CA) raised $83mm in a Series B funding round led by Redpoint Ventures,
- Investment Metrics (Darien, CT) agreed to acquire Investor Force from MSCI for $62mm implying a 3.6x run-rate revenue.
ACQ Magazine announced its ACQ5 awards last week. We are pleased that they named Marlin & Associates as the Middle-Market Investment Bank of the Year. We always like when our hard work is recognized. Details on the ACQ5 awards and others can be found here.