Fintech M&A Update

Fintech M&A Update

The fintech industry started in the 1990’s when early adopters began using technology to automate financial services. The word “fintech” combines “financial” and “technology”, and now covers the application of technological advancements to products and services in the financial industry. Fintech has become a large industry which is still growing much faster than the economy.

2019 to 2021 were terrific years for fintech mergers and acquisition (M&A). Deal activity and valuations peaked in 2021. The level of M&A activity (number of deals and dollar value) dropped in 2022 and the first half of 2023. Capital has become harder to raise for fintech firms since 2021, particularly for later stage fintech firms, and public stock offerings (IPOs) and special purpose acquisition companies (SPACs) are not viable options in the current market. That may lead to another wave of mergers and acquisitions for fintech companies that need more cash for operations or growth. Financial and strategic buyers may find bargains relative to 2021 valuations as they pursue their growth strategies within the fintech industry.

The major fintech sectors include:

  • Payments
  • Banking
  • Insurance technology
  • Capital markets (investing and wealth management)
  • Regulatory technology
  • Cybersecurity
  • Blockchain and Cryptocurrency

The payments sector has historically been the most active for M&A, but insurance and capital market sectors have been heating up. The whole industry is looking for ways to leverage artificial intelligence and machine learning, which is intriguing to buyers and investors. Strategic and private equity-backed sponsors have been the most active buyers, choosing to acquire companies with proven technology. Contact the Austin Dale Group team if you would like to discuss your specific situation and strategic options.