Buyers increasingly targeting mature and profitable models as early hype fades
The Fintech M&A report, which covers mergers and acquisitions in the period between July 2014 and December 2016, shows deal values for the first half of 2016 were down 32 per cent from the previous half year. With investors increasingly prioritising profitability and resilient business models, EBITDA multiples fell to 15.0x compared with 15.4x in the previous half-year, while revenue multiples through 2H 2016 also dipped to a four-year low of 2.2x.
Enterprise financial software companies accounted for 46 per cent of the deal count on the trailing 30-month period, with a total of 689 deals completed.
Broadridge was the top acquirer, buying eight businesses, its most recent acquisitions being investment advisor compensation firm M&O Systems, brokerage and shareholder communications business INVeSHARE and outsourced customer communications company, DST Systems.
SS&C, ICE and IHS Markit came in second place, acquiring six entities each. Other active acquirers included IRESS, Accenture, Envestnet and Digital Asset Holdings.
Search for scale and global consolidation
Deals were driven by acquirers looking to build scale, as well as the opportunity to enhance or replace in-house legacy systems. Hampleton also believes that CBOE Holdings’ $3.2 billion offer for Bats is the latest sign of a push towards global consolidation in the exchanges sector.
Enterprise resource planning and front-to-back office management solutions were particularly sought after. Meanwhile, the growing adoption of cloud and mobile services prompted established players such as SSC&C and Fiserv to buy digital solutions that either complement their existing portfolios or replace them entirely.
Miro Parizek, Hampleton managing partner, says: “Going forward, Hampleton believes that the Fintech M&A marketplace will remain consistent, continuing to deliver attractive multiples for sellers. Despite wider concerns surrounding Brexit and other geopolitical issues, London will remain an investment hotspot for fintech assets with investment activity driven by the three forces of consolidation, compliance and disruption.”
Blockchain and AI
Jonathan Simnett, Hampleton sector principal, adds: “Despite the market focus on mature technologies during 2016, Hampleton expects to see strong demand for blockchain companies and increased interest in artificial intelligence (AI) applications in the coming months as the technologies move to being a key area of focus in financial services. Disruptive alternative payment and lending services will also continue to thrive, attracting more interest from technology majors such as Apple and Google.”
About the research
The 8th bi-annual “Hampleton Partners Fintech M&A Research Report, 2H 2016” covers the period from July 2014 – December 2016, using data from 451 research. Hampleton’s research reports cover the following industries: Automotive Technology, Digital Marketing, e-Commerce, Enterprise Software, Internet of Things, IT Services and Outsourcing, SaaS and Cloud Services and Fintech.
Download full reports here: www.Hampletonpartners.com/research
About Hampleton Partners
Hampleton Partners is a London-based M&A advisory firm, serving the owners and shareholders of technology companies. With offices in the US and Europe, and associates in Asia, Hampleton combines international reach with local resources to provide the very best in M&A and corporate finance services. The Hampleton team boasts an invaluable combination of deal making expertise, operational experience, deep industry knowledge and an extensive network of contacts.