With fintech investment reaching record highs in 2018, the market is poised to enter a maturity phase characterised by a rash of IPOs and M&A consolidation, believes boutique advisor Hampleton Partners.
The latest Fintech M&A Market Report from Hampleton Partners reveals that 2018 witnessed the highest level of investment in fintech start-ups on record, with a total disclosed transaction value of $30.8 billion, more than double the numbers reached in 2017.
As fintech start-ups mature, the average funding round has also doubled in size compared to 2017, with Asia pacific leading the charge.
The stellar fintech M&A transaction value of $50 billion from 189 transactions achieved in the first half of 2018 was not replicated, however, as second half activity cooled, recording 160 transactions and a total disclosed transaction value just shy of $13 billion. The decrease in value was largely due to the absence of disclosed blockbuster deals akin to Blackrock’s $17 billion acquisition of Thomson Reuters in 1H2018.
Trailing multiples on a 30-month median basis continued their upward movement: revenue multiples reached 3.0x, up from 2.9x in 1H 2019, while EBITDA multiples reached 15.3x, up from 15.0x in 1H2018.
Jonathan Simnett, director and fintech specialist at Hampleton Partners, says: “Going forward, it is anticipated that the largest fintech firms will soon realise value through IPO in 2019. Meanwhile, most start-ups that have grown large enough to gain traction, attract a strong customer base and produce a profitable balance sheet, will remain small enough to be acquired by fintech and traditional incumbents leading to an ongoing process of consolidation and M&A.”
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