UK Fintech M&A fires back up in 2024
2023 was a challenging year for UK Fintech M&A activity and investment. Rising interest rates, rampant inflation, slowing economic growth and geopolitical headwinds led to subdued valuations and investor caution. The result was that the sector experienced the lowest levels of activity for a number of years.
2024 has already seen an uptick in M&A activity with the total volumes of disclosed UK fintech deals climbing to 50 in Q1 2024, the first consecutive increase in activity since Q4 2020. This uptick in transaction volumes has been largely driven by increased activity from strategic trade acquirers, and an incredibly strong quarter for private equity which included the secondary buy-outs of CUBE, CubeLogic and RIMES Technologies. The most active sub-sectors included Banking and Regtech (where AI and automation are aiding financial institutions with KYC and AML obligations), as well as Wealth and Asset Management which continued to drive stable deal volumes.
The outlook for 2024 remains positive with business performance and investor sentiment improving as the global macroeconomic environment continues to improve. Furthermore, many parties will be keen to transact given the dearth of deals last year; this should lead to new assets coming to market and increased competition for those assets as strategic trade parties seek to enhance their capabilities, product suites and access new customers and markets and private equity seeking to acquire high-quality assets with the ability to scale.
International M&A remains active
As deal volumes in the UK rebound from last year, we are also observing increased activity across the globe with a significant number of international and cross-border deals including:
- Open finance solution provider Fabrick agreeing to acquire German banking platform finAPI to expand its presence in the DACH region
- Corporate payment solutions provider Corpay acquired Paymerange, a US-based invoice and accounts payable automation platform for $475m
- Israeli fintech Nayax acquiring VMtecnologia, a payment technology provider specialising in self-service retail for approx $27 million; and
- US-Based CGS acquiring iCG PAY, the integrated payment processing technology provider in order to integrate its products and provide merchants and ISV partners with enhanced solutions for automated clearing house (ACH) and credit card processing
Fundraising is expected to remain a challenge into 2024
Despite growth capital investment rising in Q1 2024 to its highest level in a year at £743m, it remains down on the longer-term trend and is expected to prove challenging in 2024. Early indications for Q2 indicate that the volume of growth capital investments continue to slow, however a number of high value investments are still being secured, such as open banking and AI consumer credit decisioning provider Abound raising £800m.
Although challenging, there remains strong appetite from UK growth capital and Private Equity investors to deploy capital in UK Fintech ‘s that can demonstrate a track record delivering profits and an ability to scale.
Considerations for UK Fintech’s
Given the outlook for 2024, it may prove to be a great time to for UK Fintech’s to look to prepare themselves to access growth capital or prepare for an exit. Given the additional challenges in accessing growth capital, Fintech’s should focus their efforts on getting “investor ready” with support from advisers in order to maximise their chances of a successful fund raise or attracting a financial investor.
Given the dearth of activity in 2023, we expect strategic trade acquirers to actively approach companies within the sector in order to generate deal-flow and acquire assets at lower off-market prices.
For Fintech firms to achieve the best value, individual businesses should look to get their house in order so that they are well prepared and well informed ahead of any potential approaches. Those looking to maximise value may look to run a discrete and confidential process, inviting a select number of pre-identified key strategic acquirers to make an offer for the company in a competitive environment in order to drive value.
Our highly accredited and award-winning team work closely with clients, formulating bespoke strategies that are both commercially astute and informed by the market but also maximise and highlight the strengths, opportunities, and value-drivers of your business. If you are considering accessing growth capital or selling your Fintech business, speak to one of our experts to find out more about how we can support you and add value throughout the deal process.
