A fintech M&A bonanza drove deal value to its highest level last year

The UK helped to drive a record six months of fintech mergers and acquisitions (M&A) in the second half of last year, as the global deal total hit a new high of $29.35bn (£20.7bn).

The announced acquisition of the UK's Worldpay, by US firm Vantiv, was the largest over the period accounting for a massive $10.43bn.

Meanwhile financial services data provider Broadridge, management consulting firm Accenture and the Intercontinental Exchange were tied as the top three global fintech acquirers.

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"There will be consolidation," said Jonathan Simnett, director of technology corporate finance firm Hampleton Partners which conducted the research.

"It's going to be about mega-mergers for the year ahead. We have gone from a period of lots of little deals, to less little deals, and now we're seeing more big deals. It shows a maturing cycle."

Hampleton's research showed private equity bidders were becoming increasingly aggressive in the fintech space, with firms such as Blackstone, CVC Capital Partners and Hellman & Friedman scooping up large assets.

Simnett believes a lot of the interest has been driven by regulatory changes in financial services, which have driven demand as they place a larger focus on transparency.

"In the past, new regulation would have slowed down innovation. But technology is now so woven into the financial sector that regulatory change is good news for the businesses selling technology services," he said.

Artificial intelligence and machine learning will also increasingly become a focus for large financial institutions, as they try to reduce costs and digitalise processes for an increasingly younger consumer. The internet of things, involving wirelessly connected devices, will become a hotspot for deal activity as customers see the benefits of being able to pay for goods and services without necessarily using cash or a card.

Read more: Swedish fintech startup iZettle lands €30m to fund artificial intelligence research from European Investment Bank

"The way in which the internet of things will connect different devices will bring up different payment challenges," explained Simnett, implying the recent interest in payment processing businesses will not fade quickly.

Though some in the financial services industry have expressed contempt of cryptocurrencies such as bitcoin, Simnett believes they are "undoubtedly going to be adopted". Added to that, the blockchain technology which underlies bitcoin "will be a massive platform for providing to the unbanked".

Read more: Goldman Sachs and Citi among most active blockchain technology corporate investors

Full story: A fintech M&A bonanza drove deal value to its highest level last year: City A.M.

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