Skip to content

There is a wave of mergers in Europe in the fintech sector

Hello children! Welcome to another edition of it FintechFT. This week, the reporter for Financial Times in Paris, Akila Quinio, a summary of a very busy first semester for mergers and acquisitions activity in the fintech in Europe, and the follow-up work we did on the negotiations in the branch i United States of America indicates that shopping has stopped there. We also explore some of the changes in the digital brokerage industry, even as poster child Robinhood fades away. Later we have an interview with the CEO of an equity financing company, who tells us how his company manages the current procedure in private valuations.

financial technology

M&A activity is increasing in Europe on the fintech as capital increases and valuations fall both traditional banks and private investors are attracted.

Despite the global crisis in the market, acquisitions and purchase operations are approaching an all-time high for European fintech companies in the first half of the year, as 124 thousand operations of this type were closed, just below the record of 132 thousand in the second half of 2021, ie according to Dealroom.

“The last 12 months have been the dawn of a new era for European fintech companies,” wrote Daniel Turgel, Partner at White & Case, adding: “They are looking for market consolidation and the path to profitability is a key driver.” .

European founders looking for checks are under increasing pressure to break even as available capital dwindles. “There are a thousand ways to be profitable: either you cut costs dramatically and slow down growth, or you create economies of scale,” he says. Mark Menacedirector of Founders Future.

Lawyers and investors expect merger and acquisition activity to accelerate exponentially in the next year and a half. “It’s no secret that fintech board members are also lobbying in that direction,” he said. Under threat.

An example of the trend is the purchase of German SME neobank Penta by its French counterpart Qonto, which closed at the end of July. With buyouts, fixed cost business models – common in fintech companies – can increase revenue through growth. A cross country merger helps to expand your geographic reach in crowded parts of the market.

Consolidation will bring cultural challenges for the founders. Pan-European acquisitions will test their ability to adapt to new markets and regulations, but the new trend also represents a break from the “build rather than buy” culture, which may have existed previously due to the availability of cheap cash-raising .

Markets M&A projects are also being encouraged by a more recent trend of “traditional banks” looking for markets as they enhance their innovation strategies. Lower valuations make targets among fintech companies more attractive as large firms seek digital transformation with strategies such as Lloyds’ £1bn plan.

Rosh Vijayarathnadirector of corporate finance at Silicon Valley Bank, said that private equity players with large amounts of cash reserves are also looking for bargains and we should expect them to participate more in trading alongside traditional institutions.

“Big corporations are always a bit slow to wake up, so they do less of that kind of operation than fintech startups, but let’s talk at the end of the year and it will be a completely different story,” he said. Under threat.

in the market of United States of Americathe total value of agreements reached by companies of fintech fell to about $9 million last month, down from $2.53 billion a year ago, according to the latest study from S&P Global Market Intelligence.

Questions and answers

Every week we ask founders of fast-growing fintech companies to introduce themselves and explain what makes them stand out in such a crowded industry. Our slightly edited conversation appears below.

Declining valuations of growth companies in private markets take a toll on employees who receive a significant portion of their compensation in stock, and on companies that make loans backed by staff shares.

Talk to Frederik Mijnhardt, CEO of equity finance firm Secfi, on how his firm is coping with the current wave of downside rounds and what this means for the offset finance space. Since launching in 2017, Secfi has already provided more than $700 million to startup employees and has kept loss rates below 2 percent despite the current difficult environment.

What is the business model?

When we help someone with a financial transaction, we get a commission. Our sources are funded by institutional investors. It’s actually external capital that we inject on behalf of these investors. In addition, we have advisory services that charge recurring management fees based on the relationship. Everything is B2C. We work with companies, but it’s more of a partnership model.

How does market volatility affect underwriting?

The donation box is back to what it was before the pandemic. Many of these companies had extraordinary growth thanks to covid and now we are back to normal. It is not closed. It is not reset. It’s just going back to where it was before. In the end, we do not invest in one company, but in many and many companies at the same time. There are businesses that we decided not to fund because we didn’t believe in the numbers. We are not worried about our wallet.

Will lower valuations have long-term implications for the total potential market (TAM) for equity financing?

This year, we are going to register a declining TAM, I can say, but if we think about the next 10 years, the TAM will grow a hundred percent because people will be reimbursing more capital. It’s not a trend that’s going to stop. Europe, for example, in terms of capital ownership, is where the United States was 15-20 years ago. This way of creating wealth also creates better and more valuable companies. In reality, the investor, the employee and the company win.

In other news

Brokerage blues. Millions of active users are fleeing the Robinhood brokerage app, in a sign that mass market interest in stock trading has been longer than a revolution. But the upstart online retail broker’s mission to “democratize finance for all” seems to be catching on across the industry. The first bond ETF was launched last week, paving the way for retail traders to gain easier access to this market. Meanwhile, a new study suggests that the higher fees paid by retail investors for actively managed funds are on track to match the fees charged to institutional investors.

Virtual payments are affected by a harsher reality. Gaming companies reported weaker sales as inflation curbed discretionary spending and the easing of pandemic restrictions forced people to relax alternatives. In-game payments have been a major area of ​​investment for gaming companies. fintech trying to install themselves as essential infrastructure in the emerging metaverse, but declining engagement statistics raise questions about the trend’s sustainability. Netflixthe streaming giant, outlined its gaming ambitions with a disruptive subscription model that was more popular with consumers than controversial microtransactions.

Crypto University. Revolution he noted last week that more than a million customers in 32 different countries completed all of the crypto education courses the “bank of sorts” launched last month.

Start investing your money in cryptocurrencies and get Free Bitcoin when you buy or sell 100$ or more if you register in Coinbase