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Downturn deals: Is fintech M&A trending up?

As the fintech landscape continues to evolve, the potential for an M&A boom remains a topic of speculation but a flurry of summer dealmaking heralds a busy end of the year.

Deal handshake


The annual summer slowdown is almost over with founders and investors returning from their holidays. 

Are they returning to a fintech mergers and acquisitions (M&A) boom for the closing third act of 2023?

As in the financial crisis of 2008-9, M&A hasn’t found much of a footing in the past 18 months rising rate environment.

In the past few months, however, despite a large drop in funding volumes, M&A activity appears to be picking up with some notable deals. 

Mega fintech deals have not yet really materialised this year, with the exception of Visa’s $1bn cash deal for Brazilian payments scale-up Pismo, whose clients include Revolut, N26 and Nubank -  in June.

At the margins, though, mid-sized acquisitions seem to be picking up steadily over the summer months.


Aman Behzad, founder and managing partner at Royal Park Partners says M&A has “intensified across the global fintech scene”, recently. 

“Fintechs that are coming of age will flex their M&A muscles to bolster revenue streams – seeking acquisitions that add value to their tech or product set and put them on a stronger path to profitability,” he said.  

“Meanwhile, faced with a more unforgiving funding environment than years gone by, earlier-stage businesses that struggle to raise capital will be tempted to merge with better-capitalised players,” he added. 

Behzad counts 58 transactions with a total value of $12bn disclosed in July 2023 alone. 

“Although Capital Markets and Wealth Management led the way with 17 deals, activity was fairly distributed across verticals indicating that many sectors are ripe for consolidation over the next 12 months.” 

Today, Swedish payments fintech Trustly announced it had acquired rival Slimpay in a €70m deal which will add both geographic expansion and new products to the two companies.

Last week, as AltFi exclusively revealed, Auxmoney made its first foray into fintech M&A when it scooped up Dutch credit marketplace Lender & Spender.

What separates these two deals from established narratives is that in both cases it is other fintech companies that have been the buyers. 

Despite banks sitting on huge gains from a rising interest rate environment, it appears that fintechs are becoming increasingly keen to buy each other. 

The best case in point so far is the deal between two saving and investing fintech veterans Acorns and GoHenry in April. 

US-based Acorns acquired GoHenry and its European arm Pixpay, which operates in the UK and US and more recently France, Spain and Italy, in April too.

Another rumoured huge fintech-on-fintech M&A deal is between UK digital banking darling Monzo and Lunar, with reports the two banks were in talks to join forces in what would be a first for two European fintech unicorns. 

A similar deal has been reported for Shawbrook Bank, although in this case, it's eyeing the acquisition of the 150-year-old Coop Bank.

“Consolidation is a story that will keep repeating itself – indeed, fintech is only in the first innings of a multi-decade transformation. The consolidators, however, are rotating," said Behzad.

"Typically, the usual suspects have been the big banks and tech giants; but increasingly M&A activities are driven by opportunistic fintechs jumping at the opportunity to snap up valuable technology or talent at a discount. The best players will unlock economies of scale and opportunities for growth," he added.

Aren’t we in a downturn?

The frothy days of 2021 are some way off and the full extent of the funding slowdown from this peak is becoming a more and more pressing issue for founders and their financial backers. 

While layoffs and a focus on profitability over growth have helped many fintech startups extend their cash runways, for hundreds of companies this can only go far. 

Venture capital investors and other market participants have long talked about a budding showdown this year and into 2024 for fintech companies that are still operationally loss-making but nonetheless are sitting on valuable businesses. 

The issue here is a familiar one. Accept new funding on potentially unpreferable terms or go out of business. 

Two notable names have done exactly the latter in the past month: UK fintech lenders Fronted, which shuttered earlier this month and Koyo, which closed at the end of July. 

This showdown will see market consolidation as investors opt for a swift exit rather than encouraging portfolio companies to raise new funds amid the more difficult market for capital.

Investment into the UK fintech sector fell by 57 per cent in the first half of the year, according to KPMG, with slump from $13.8bn in H1 2022 to $5.9bn for the same period this year. 

While there were 215 UK M&A, PE and VC fintech deals completed in H1 2023, this was down from 392 in H1 2022. This feeds into a slow global M&A activity for the first half of 20223 with only $24bn in deal value. 

According to data from FT Partners, after six consecutive quarters of decline, total global fintech deal activity volume across financing, M&A and IPOs shows signs of a summer pickup. 

In the second quarter of the year, the latest data available, fintech M&A deal volume picked up from the worst quarter in Q1 since the start of the pandemic with volumes 2.5 times higher than the previous three months.

Momentum around fintech M&A appears to be continuing into Q3 as more than half of all $500 million+ deals in 2023 so far were announced in June and July.

A blockbuster initial public offering (IPO) has for the most part always been the dominant dream for fintech founders when it comes to the inevitable exit. Few picture selling their companies to big corporates or banks, or other fintechs for that matter.

However, investor interest and funding play a significant role in driving M&A activity.

"This is the ultimate test for fintech; time will tell which players thrive, and which crumble under the pressure,” Behzad said.

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