Mergers and acquisitions in financial technology
M&A statistics in the fintech sector are setting new historical highs. Compared to 2020, the number of deals in 2021 increased by 23%. These numbers can be seen in the State of Fintech Q3'21 report on the state of financial technology for Q3, 2021. In this blog, I want to take a closer look at fintech investment trends.
The year is not over yet, but it is already safe to assume that it will be a record year in terms of exit statistics due to mergers and acquisitions in the fintech sector. Since January, a record of €22.6 billion has been exited in Europe, with €18.5 billion of this coming from listings and mergers with special purpose companies and the remainder from acquisitions. The biggest consolidation occurred in the B2B segment because companies are putting more effort into upgrading due to the pandemic. Funding trends are driven by two segments — payments and manufactured products.
Mergers and acquisitions in digital lending (the “buy now, pay later” BNPL model) continue to dominate the trends of 2021, as banking institutions and payment giants seek ways to get involved in the rapid development of e-commerce. A prime example is Square’s $39 billion acquisition of BNPL service Afterpay this summer. Initial public offerings (IPOs) and mergers with companies given carte blanche in fintech rose similarly in the third quarter of 2021, rising to 46 and 14 deals, respectively.
The third quarter of 2021 was marked by the purchase of 61 digital lending startups, which is a 110% increase in the number of deals relative to 2020. And in banking, the number of M&A deals during the same period was 31, which is a 121% increase over the same period last year. The largest deals were made by PayU with its purchase of Indian payment platform BillDesk, PayPal with its acquisition of Japanese payment system Paidy, and Visa with CurrencyCloud, which deals with cross-border payments.
The number of new companies that were granted “unicorn” status in Q3 2021 reached 43. Thus, the number of companies with a capitalization of $1 billion increased to 206. This means that this year’s figures are twice as high as those of the same period in 2020. Among the leaders in the creation of unicorn companies are the U.S., Asia, and Europe, they have 21, 8, and 6 companies, respectively. The most successful project is considered to be the cryptocurrency exchange FTX, which was launched in 2019, with a daily transaction volume of $14 million.
Fintech financing trends
In the third quarter of 2021, global fintech funding grew by 147% year on year. Thus, the total amount of fintech financing during this period reached $94.7 billion.
Large gathering rounds (mega-rounds) with $100 million or more raised the majority of global financial technology funding in the third quarter of 2021, accounting for 64% of quarterly funding. Because of the need to increase the speed of digital transformation and expand their digital capabilities, corporations were particularly active in venture capital deals, investing nearly $21 billion in about 600 deals around the world. Moreover, many realized that they would get there faster by collaborating, investing, or acquiring fintech.
The surge in investment in financial technology continues to stimulate competition and the need for companies to take swift action in the form of additional investments. I wonder if the trend of large investments in fintech will continue next year. After all, interest hasn’t waned in more than a year, even in the face of a pandemic.
