August 26, 2021

UK and Europe—Key FinTech M&A Deal Drivers and Trends

配信申込

ジャンプリンクテキスト

 

UK AND EUROPE—KEY FINTECH M&A DEAL DRIVERS AND TRENDS

Shearman & Sterling has teamed up with FinTech advisor and incubator, Rise created by Barclays, and premier market data provider, S&P Global Market Intelligence, to produce a global FinTech M&A report—The Changing FinTech Landscape–A Snapshot of M&A Themes and Trends. This report gives an overview of global FinTech deal activity and discusses key FinTech M&A drivers, themes and trends to help financial institutions, FinTechs and investors prepare for transactions in the remainder of 2021 and into 2022.

2021 has also been an incredibly busy year for FinTech M&A and investment activity in the U.K. and Europe. In the first half of 2021, U.K. FinTech companies attracted some £24.5 billion of investment (coming second only to their U.S. counterparts), while the European FinTech businesses raised €10.4 billion, surpassing the total amount of FinTech investment in Europe in 2019.

As the remainder of 2021 and the start of 2022 are poised to hit new highs, we outline here how some of the key FinTech M&A drivers and trends that have driven global activity have also done so in the U.K. and Europe, as evidenced by some of the most recent transactions:

Consolidation of FinTech Players as a Growth Strategy

  • Adapting to consumer demand for quality providers. As the FinTech sector matures, consumers are placing a greater emphasis on quality FinTech players that can meet and anticipate their demands and demonstrate strong compliance cultures and operational resilience. M&A will prove critical to FinTech businesses’ ability to eliminate weaker rivals and become the undisputed market leaders with a tight grip on customer loyalty. We will likely see a continuation of the trend of FinTech players strategically growing their market shares and product offering through M&A. Recent examples include:
  • The Stockholm-based “buy-now-pay-later” app and FinTech unicorn, Klarna, went on a buying spree this year and acquired various FinTech businesses to construct a shopping ecosystem and provide an enriching shopping experience for its consumers, buying HERO (a social shopping platform), APPRL (an end-to-end influencer marketing software) and Stocard (a digital wallet and shopping app).
  • The consolidation of domestic payment service providers, including Nexi’s €15 billion merger with its Italian rival, SIA, and a subsequent merger with Denmark’s Nets; and Worldline’s acquisition of its French peer, Ingenico, for €7.8 billion.
  • With the ambition of creating Europe’s best digital wallet for consumers, Danske Bank entered into an agreement with OP Financial Group in Finland and a consortium of banks in Norway to merge mobile payment providers Vipps and Pivo into Danske Bank’s Mobile Pay brand.
  • Wide re-bundling of financial services to become the “single money app” for certain consumer segments. M&A presents the opportunity for FinTech businesses to quickly broaden their offerings, enabling consumers to access personalized solutions in a single location. Examples include:
  • SumUp, the U.K. mobile payment firm, acquired Paysolut (a Lithuania-based banking software and system provider), which is one of the latest steps in a series of strategic FinTech acquisitions to become a technology-based banking solution provider for consumers.
  • Atom Bank, the U.K.’s first app-based bank, entered into a £300 million lending partnership with Funding Circle (the U.K.’s largest small business loan platform) to provide all-around services for its SME clients.

Spearheading Digital Transformation in Banking

  • Dramatically digitalized banking needs. The COVID-19 pandemic forced a dramatic change in the way that most consumers interact with financial services, presenting both challenges and opportunities for traditional banks. Most notably, the consumer preference for the physical proximity of local branches has been replaced by the flexibility to conduct transactions remotely. For example, Santander U.K. is set to close 111 branches in 2021.
  • Acquiring digital capabilities and cross-sell opportunities. Strategic M&A, including FinTech partnerships and minority investments, enables banks to obtain digital expertise and provide new products to existing customers rather than building their own solutions. Banks in Europe (including ABN AMRO, Nordea Bank and Erste Group) have recently announced their plans to seek acquisitions to adapt to the accelerated demands for digital products and services. In addition:
  • JPMorgan Chase recently announced its plan to launch a digital consumer bank in the U.K. and acquired Nutmeg (a ‘robo-advisor’) to boost its digital wealth offering outside of the U.S.
  • The Italian challenger bank, Illimity, entered into a strategic partnership with the Ireland-based ION Group to leverage the latter’s new IT platform with the aim of quadrupling its net profits by 2025.

Leveraging FinTech by Non-Financial Firms

  • Growing importance of embedded finance. A range of non-financial firms, from retailers to big tech companies, now offer embedded financial products that seek to add value to consumers and to leverage valuable consumer data that they may have collected through other channels.
  • Solarisbank, a Germany-based Banking-as-a-Service provider that enables businesses to integrate financial services into their offerings, recently acquired its U.K. rival, Contis, which is a clear sign of the growing demand for embedded finance driving M&A activity.

Payments Continuing to be the Key Theme in FinTech M&A

  • Growth of online commerce. The volume of digital payments and the number of digital accounts increased significantly in 2020. Payment networks are expanding into platform providers by providing a variety of different payment and non-payment services. Payment infrastructure has therefore also seen significant deal activity.
  • Visa acquired Swedish FinTech business Tink (a European open banking platform) for €1.8 billion and London-based Currencycloud (a cross-border payment solutions provider whose technologies power challenger-banks including Revolut, Starling and Monzo) for £700 million.

Reviving M&A Activities in Digital Lending and Insurance

  • Acquisition opportunities in digital lending. The digital lending sector is recovering from the collapse of origination volumes as digital lenders tightened underwriting criteria and pulled back on lending while demand for loans in certain sectors declined amid the COVID-19 pandemic, all creating M&A opportunity. For example:
  • British challenger bank, Starling, acquired Fleet Mortgages (a specialist buy-to-let mortgage lender) as a part of its wider plan to expand its lending and mortgage services.
  • Booming InsurTech investments. In the first half of 2021, over €1.7 billion was invested across 52 deals in the European InsurTech sector, including:
  • Aviva, the U.K.’s leading insurer, expanded into InsurTech through its investment collaboration with venture capital firm, Anthemis, and its acquisition of Wealthify (a ‘robo’ investment advisory service).
  • Bolttech, an InsurTech unicorn, acquired i-surance (a Berlin-based next-generation B2B2C digital insurance platform) as part of its European expansion.

To discuss any of the themes and trends in this report further please contact Phil Cheveley or Barney Reynolds.

For more detail, please watch our FinTech expert panel discussion and subscribe to the mailing list of our FinTech Foundry, Shearman & Sterling’s dedicated program to support FinTech startups and entrepreneurs shaping the future of financial services.

著者等

Barnabas Reynolds

パートナー

金融機関アドバイザリー・金融レギュレーション

+44 20 7655 5528

+44 20 7655 5528

ロンドン

Phil Cheveley

パートナー

M&A

+44 20 7655 5822

+44 20 7655 5822

ロンドン

Kate Chan

アソシエイト

M&A

+44 2076 555 5952

+44 2076 555 5952

ロンドン