Hampleton’s Latest Fintech Report Suggests M&A is Booming in 2016
Valuation metrics in Fintech M&A
Over the past 30 months (since March 2016), fintech companies have achieved a median enterprise value to sales multiple of 3.2x and an EV/EBITDA of 15.0x. While these figures are certainly positive, this data includes transactions involving software, services, and integrators in both B2B and B2C markets.
Enterprise financial software solutions are in fact trading much higher with medians of 4.0x EV/S and 18.5x EV/EBITDA – evident of the premium that acquirers are willing to pay for cutting edge enterprise financial software companies – particularly in areas relating to governance, risk, compliance and security.
Europe taking on the US
As we all know, across the technology (and thus the M&A) board, the US dominates. An overwhelming proportion of technology companies that are sold globally have +1 as their headquarters dial code. Fintech however, is a small but exciting portion of the market that is refreshingly more European than most – over 30% of companies acquired in the past 30 months were based in Europe with only 59% based in the US (and 11% in the rest of the world).
Growing number of EU exits
Granted, over 50% of transactions involved US-based companies, but Europe is gaining ground on Silicon Valley, Alley and co. with bustling fintech incubators creating world-class software companies. We foresee European fintech M&A going strength to strength and comprising 35-40% of global fintech activity over the next few years – providing however that major European cities keep up with their fintech-focused initiatives.
UK a leading light
The UK has firmly cemented its position in Europe as the epicentre of where finance meets technology. A 2016 report by Deloitte and the HM Treasury estimates that in 2015 the UK FinTech sector represented £6.6 billion in annual revenue and attracted a further £524 million in investment. The UK’s regulatory environment has been instrumental in driving growth in the sector.
Recent government-sponsored initiatives include the ‘regulatory sandbox’ implemented by the Financial Conduct Authority (FCA) which will allow businesses to test out new financial products and services without incurring the normal regulatory hurdles of engaging in these activities.
Prolific acquirers doing what they do best
As fintech becomes a more mature M&A market, we logically expect to see an increasing number of acquirers making purchases in the fintech space, and, prolific acquirers continuing to scale up their offerings.
With a flurry of billion dollar deals during the past 30 months and financial sponsors pouring money into this sector, we expect to see increasing M&A activity in fintech as the market matures and fintech start-ups continue to apply pressure to the incumbent financial services industry.
To contact Hampleton about your fintech M&A or growth financing queries or requirements, or simply to schedule a confidential conversation regarding technology M&A any of our other Directors and Sector Principals, visit https://www.hampletonpartners.com/contact/ and submit your query using the contact form.
About Hampleton Partners
Hampleton Partners is at the forefront of international mergers and acquisitions and corporate finance advisory for companies with technology at their core. Hampleton’s experienced deal makers have built, bought and sold over 100 fast-growing tech businesses and provide hands-on expertise and unrivalled advice to tech entrepreneurs and companies which are looking to accelerate growth and maximise value.
With offices in London, Frankfurt and San Francisco, Hampleton offers a global perspective with sector expertise in: Automotive Technology, IoT, AI, Fintech, Hi-Tech Industrials & Industry 4.0, Cybersecurity, VR/AR, Healthtech, Digital Marketing, Enterprise Software, SaaS & Cloud and eCommerce.