Global Fintech mergers and acquisitions (M&A) surged in the first half of 2022, recording 591 deals as investors capitalized on discounted opportunities.
Data from Hampleton Partners, a corporate finance advisory firm, indicates a 46 percent increase in fintech deals compared to the first half of 2021, which saw 406 transactions, and a staggering 70 percent rise from pre-pandemic levels in the first half of 2019, which had 348 deals.
Despite this increase in activity, valuations remained relatively stable. The median revenue multiple for the trailing 30 months in 1H2022 was recorded at 3.1x, which aligns with levels maintained over the past two years.
Miro Parizek, founder and principal partner at Hampleton Partners, stated, “Fintech continues to be a highly attractive target for both financial and strategic dealmakers, standing resilient against a broader global M&A slowdown. The availability of capital is motivating buyers and investors to pursue acquisitions while high-growth fintech companies are available at historically affordable prices. Unlike the 2008 recession, any potential downturn is unlikely to hinder Fintech M&A activity.”
The crypto and blockchain sector notably experienced a significant increase, with 107 transactions recorded over the past year, marking a 75 percent growth year-over-year. As blockchain technology facilitates monetization in the metaverse, companies are rapidly entering this space to develop digital assets. For instance, in February, Republic Realm set a record by purchasing land in the Sandbox metaverse platform for $4.3 million. Additionally, in May 2022, Descrypto Holdings acquired OpenLocker, an online NFT trading portal and marketplace, for $11 million.
Open banking is another area seeing a rise in M&A activity, with the user base projected to expand five-fold, reaching 64 million consumers by 2024. Embedded finance solutions from firms like Stripe, Clearpay, and Clear Bank are also gaining traction, projected to achieve transaction values of $7.2 trillion by 2030.
Parizek further commented, “Many fintech companies have recently secured substantial investment capital, positioning some to evolve into serial acquirers within their niches, while many others will likely enter the market as sellers amid a favorable M&A environment.
As a growing number of private fintech firms face monetary constraints to sustain operations, they will have three primary options: seek venture capital funding, sell to private equity or strategic buyers, or cease operations altogether, making the sale option increasingly appealing.
At the same time, public companies with considerable capital reserves and private equity firms with substantial dry powder, alongside well-funded late-stage high-growth private companies and traditional financial services firms eager to maintain their relevance, are actively searching for valuable assets in the fintech sector.
This dynamic is set to drive increased overall M&A activity within the fintech landscape.