Jan 25, 2023

Financial Technology & Payments M&A Update – January 2023

FinTech M&AEnterprise Consolidation Drives Robust FinTech M&A Valuations

Capstone Partners released its January 2023 Financial Technology (FinTech) & Payments Market Update, reporting that the FinTech & Payments sector has showcased significant defensibility amidst rising inflation and interest rates, evidenced by healthy levels of merger and acquisition (M&A) and financing activity through year-to-date (YTD) 2022 as of December 1. Supported by a relatively strong U.S. dollar, U.S.-based buyers in the sector have gained substantial leverage in cross-border transactions, especially in the Asian and Latin American markets—where depreciating local currencies have created low-cost assets. Driven by volatile public markets, there has been significant consolidation of large public enterprises in the FinTech & Payments sector through YTD. This has typically materialized in take-private acquisitions by private equity firms and public players consolidating competitors.

Global M&A volume in the FinTech & Payments sector set an annual record in 2021 with 1,035 transactions announced or completed, representing an increase of 21.5% year-over-year (YOY). Deal activity has continued at a healthy pace in 2022, with 769 transactions announced or completed YTD, mirroring pre-pandemic levels. Further consolidation is expected as M&A has become a key strategic option for mature FinTech and payment providers seeking to gain market share and evade current public market volatility. Average sector M&A purchase multiples have remained healthy despite global economic turmoil and a downturn in M&A volume. In Q3 2022, sector M&A transactions averaged 5.7x EV/Revenue, rising more than a full turn from Q3 2021. At the top end of the M&A market, there have been 17 sector deals YTD with valuations exceeding $1 billion in enterprise value, demonstrating buyers’ willingness to consolidate leading players. Although average purchase multiples have been uplifted by large-scale transactions, middle market participants (less than $500 million enterprise value) have continued to comprise an overwhelming majority of FinTech & Payments sector deal activity.

Also included in this report:

  • Capstone’s FinTech Front Runners, a series of FinTech and payment startups that have exhibited exceptional leadership and revenue growth.
  • How the U.S. dollar has appreciated compared to foreign currencies and how this has impacted cross-border M&A activity in the sector.
  • Why the Bank Technology segment has received the highest sector M&A valuations through YTD.
  • How the Payments segment has continued to lead sector M&A volume and financing activity.
  • Which verticals are supporting transaction activity in the Insurance Technology segment.
  • How wealth managers have reshuffled their approach to daily business, driving deal flow in the Capital Markets Technology segment.

Related Transactions

Insights for Middle Market Leaders

Receive email updates with our proprietary data, reports, and insights as they’re published for the industries that matter to you most.