Our thinking

Financial institutions M&A: Sector trends - January 2021

What's inside

January 2021

We highlight the key European M&A trends in the second half of 2020, and provide our insights into the outlook for M&A moving forward.

Introduction

2020 was a year of unprecedented peaks and troughs for European financial services M&A—a year with glittering prospects hit rock bottom in April, following the onset of the first COVID-19 lockdown. Bumper trading revenues and advisory fees recorded by the Bulge Bracket bolstered market confidence, but dividend bans and fears surrounding loan default levels soon took their toll.

Just when all seemed lost, deal-making rebounded strongly, hastening the commencement of bank consolidation M&A across Europe and the promise of an M&A bull market in 2021.

In this edition, we navigate the choppy financial services M&A landscape of 2020 to bring you key deal highlights and M&A trends across Europe and the UK. Focusing on Banks, Fintech and Other Financial Services, we also provide our insights on the outlook for M&A in H1 2021 and beyond.

Key highlights from H2 2020 include the following:

  • Banks: Mega domestic bank consolidation takes centre stage—Spain leads the charge by way of the CaixaBank / Bankia and Unicaja Banco / Liberbank all-share mergers
  • Fintech: Financial sponsors demand more bang-for-buck, as equity valuation volatility wreaks havoc for funding rounds
  • Asset / Wealth Management: Market consolidation continues at pace, as the COVID-19 pandemic heaps pressure onto smaller managers
  • Payments: Pan-European champions emerge amidst COVID-19 turmoil—Germany (Giropay / Paydirekt), France (Worldline / Ingenico) and Italy (SIA / Nexi)
  • Stock Exchanges / Clearing Houses / Trading Venues: Market infrastructure juggernauts thunder the M&A plains—vertical integration remains a key focus
  • Brokers / Corporate Finance: "Traditional" brokers resort to M&A to survive in the COVID-19 climate, which has materially boosted customer demand for DIY trading platforms
  • Consumer Finance: Financial sponsors back niche providers—child-friendly, gig-economy and POS finance attract interest in H2 2020
  • Specialty Finance / Marketplace Lending: Specialty finance businesses abandon retail investor roots in favour of institutional support

M&A Forecast legend

European financial services M&A trends

Mega domestic bank consolidation takes centre stage— Spain leads the charge

Bank M&A across Europe comes to a boil—the COVID-19 pandemic has hastened the confluence of conducive conditions for mega domestic mergers. Spain and the Balkans lead the charge, with Italy, Germany, France, Poland and the UK expected to follow.

vault

Europe's unicorns lengthen their stride amidst COVID-19 uncertainty—the bold set their sights on IPO in 2021

2020 has been a turbulent year for many fintechs. Established fintechs and startups with deliverable business plans have thrived, while others have suffered the indignity of plummeting valuations and down rounds.

office building statue

Asset/Wealth Management

Market consolidation continues at pace, as the COVID-19 pandemic heaps pressure onto smaller managers

gold coins

Payments

Pan-European champions emerge amidst the COVID-19 turmoil— Germany (Giropay/Paydirekt), France (Worldline/Ingenico) and Italy (SIA/Nexi)

Classical architecture

Stock Exchanges/Clearing Houses/Trading Venues

Market infrastructure juggernauts thunder the M&A plains—vertical integration remains a key focus

assessment graph

Brokers/Corporate Finance

"Traditional" brokers resort to M&A to survive in the COVID-19 climate, which has boosted customer demand for DIY online trading platforms

stock market graph

Consumer Finance

Financial sponsors back niche providers—child-friendly, gig economy and POS finance attract interest in H2 2020

stock market display

Specialty Finance/Marketplace Lending

Specialty finance businesses abandon retail investor roots in favour of institutional support

computer circuit

Payments

Financial institutions M&A sector trends: payments — H2 2020 and outlook for 2021

Insight
|
11 min read

Pan-European champions emerge amidst the COVID-19 turmoil— Germany (Giropay/Paydirekt), France (Worldline/Ingenico) and Italy (SIA/Nexi)

 

Overview

Current market

  • Stratospheric M&A activity levels

We are seeing

  • Transatlantic mega-deals continue (e.g., Paysafe & Foley Trasimene merger)
  • Pan-European champions emerge amidst surge in demand for digital payments on account of the COVID-19 pandemic:
    • France (Worldline's acquisition of Ingenico)
    • Italy (SIA & Nexi merger)
    • Germany (Giropay & Paydirekt merger)
    • Nordics (Nexi's acquisition of Nets)
  • Market participants favour scale (e.g., PayPoint's acquisitions of Handepay and Merchant Rentals)
  • Solution providers stockpile growth capital (e.g., Satispay's €93 million funding raising, Razorpay's US$100 million funding raising, Revolut's US$80 million funding raising, etc.)

Key drivers/challenges

  • Allure of scale and scope:
    • Transatlantic capacity to claw market share from Fiserv/First Data and Worldpay/FIS
    • Achieving economies of scale to withstand margin compression across merchant processing, issuer processing and core processing
    • Enhancing customer proposition through delivery of integrated digital platforms
  • Financial sponsors supercharge:
    • Established players (e.g., Silver Lake's participation in Klarna's US$650 million funding round)
    • Disruptors (e.g., Apis Partners' participation in Cashfree's Series B funding round)
    • Innovators (e.g., Helios' participation in Thunes' Series B funding round)
    • Buy now-pay later providers (e.g., KKR-backed Heidelpay's acquisition of Paysafe Pay Later)

Trends to watch

  • Increasing payment counterparty risk for banks:
    • Migration of bargaining power towards payments processors in partnership arrangements
    • Service continuity concerns resulting from a smaller number of potential providers
    • Disintermediation of banks, as payment technology businesses increasingly own customer interface
  • Regulation akin to financial market infrastructure, as reliance on payment technology skyrockets in the COVID-19 climate 

 

Our M&A forecast

Very high levels of M&A activity to continue, as customers increasingly rely on e-commerce and digital spending to weather the COVID-19 storm.

 

Other financial services—Publicly reported deals & situations

Market highlight:

Italian payment firms Nexi and SIA merged to create a €15 billion-valued European payments giant encompassing the entire payments value chain.

 

High appetite and deep pockets

Private equity—acquisitions/ equity investments:

  • Global Fintech Investments: Acquisition of Finablr's business (December 2020)
  • Accel: Participation in €86 million Series B funding round for Lydia (December 2020)
  • Bain Capital Ventures: Participation in US$95 million Series F funding round for GoCardless (December 2020)
  • Accel: Participation in £14 million Series A funding round for Primer (November 2020)
  • Apis Growth: Participation in US$35.5 million Series B funding round for Cashfree (November 2020)
  • LGT Lightsone and TIM Ventures: Participation in €93 million funding round for Satispay (November 2020)
  • Cegedim: Participation in €6 million funding round for Score & Secure Payment (November 2020)
  • AnaCap: Acquisition of 60% of MarketPay (November 2020)
  • GIC and Sequoia: Participation in US$100 million Series D funding round for Razorpay (October 2020)
  • Truist Financial Corporation: Participation in US$31 million funding round for Veem (September 2020)
  • Silver Lake: Participation in US$650 million funding round for Klarna (September 2020)
  • Accel, Aleph, Bessemer Venture Partners, Coatue Management and General Catalyst: Participation in US$144 million funding round for Melio (September 2020)
  • Helios: Participation in US$60 million Series B funding round for Thunes (September 2020)
  • TVC: Participation in €90 million Series B funding round for Mollie (September 2020)
  • Nordic VC Industrifonden, Brightly Ventures and Luminar Ventures: Participation in €3 million Seed funding round for Open Payments (August 2020)
  • Y Combinatory: Successful US$12 million Series A funding round for Routable (August 2020)
  • Generation Investment Management, Owl Rock Capital, Stripes, DN Capital, Top Tier, Princeville Global and Threshold Ventures: Participation in US$85 million Debt Financing funding round for Remitly (July 2020)
  • TSG Consumer Partners: Participation in US$80 million Series D funding round for Revolut (July 2020)

Institutional—acquisitions/ equity investments:

  • Railsbank: Acquisition of Wirecard UK (August 2020)
  • BBVA: Acquisition of further 50% of Adquira Mexico (August 2020)
  • Lloyds: Acquisition of minority stake in Form3 (July 2020)
  • Kvika banki: Acquisition of Netgiro (July 2020)
  • Bankia: Acquisition of 20% of Finweg (July 2020)

Non-FI:

  • Macy's: Acquisition of minority stake in Klarna (October 2020)

Market appetite:

  • Ani Financial (China): Shanghai Stock Exchange and Hong Kong Stock Exchange IPO (August 2020)

 

Scaling-up of market players

Deal highlights:

White & Case represented TPAY Mobile, one of MEA's leading merchant acquirer and digital payment platforms, on its Middle East and North African mobile payments/direct-carrier billing strategic partnership with Bango Plc.

White & Case represented Nets, one of Europe's preeminent payments solutions providers, on its acquisition of the Poland-based PeP Group.

White & Case represented Klarna on its US$650 million equity funding round, at a post-money valuation of US$10.65 billion. Klarna is the highest-valued private fintech in Europe and the fourth-highest globally.

The COVID-19 pandemic has given a boost to digital payments in Germany with e-commerce revenues jumping 18% year over year to €6.8 billion. Handelsblatt (May 2020)

Mergers:

  • Paysafe & Foley Trasimene: Merger (December 2020)
  • Sia & Nexi: Merger (October 2020)
  • Giropay & Paydirekt: Merger (August 2020)

Acquisitions:

  • Kvanto Payment Services: Acquisition of 51% of Mobileware Technology (December 2020)
  • Euronet Worldwide: Acquisition of Bank of Ireland's non-branch ATM network (December 2020)
  • WEX: Acquisition of eNett (December 2020)
  • WEX: Acquisition of Optal (December 2020)
  • Worldline: Acquisition of 51% of ANZ's commercial acquiring business (December 2020)
  • Buckaroo: Acquisition of Sisow (December 2020)
  • IDEMIA: Acquisition of Pcard (December 2020)
  • Nexi: Acquisition of Nets (November 2020)
  • PayPoint: Acquisition of Handepay (November 2020)
  • PayPoint: Acquisition of Merchant Rentals (November 2020)
  • Nuvei: Acquisition of Smart2Pay Global Services (November 2020)
  • Mode: Acquisition of 45% of JGOO (November 2020)
  • Visa: Acquisition of YellowPepper (October 2020)
  • Nets: Acquisition of Polskie ePłatności (October 2020)
  • Nets: Acquisition of CCV Schweiz (October 2020)
  • Syncapay: Acquisition of Wirecard North America (October 2020)
  • Paynetics: Acquisition of Wirecard's UK and Ireland corporate payout card portfolio (October 2020)
  • ClearCourse Partnership: Acquisition of Adelante (October 2020)
  • ClearCourse Partnership: Acquisition of E-Novations (October 2020)
  • Prism Advance Solutions: Acquisition of Finablr (October 2020)
  • Worldline: Acquisition of Ingenico (October 2020)
  • Castles Technology: Acquisition of Spire Payments (September 2020)
  • Sibs: Acquisition of Wirecard Romania (September 2020)
  • Worldline: Acquisition of 53% stake of GoPay (September 2020)
  • Nerdwallet: Acquisition of Know Your Money (August 2020)
  • WorldRemit: Acquisition of Sendwave (August 2020)
  • PagSeguro: Acquisition of Wirecard Brazil (August 2020)
  • Global Payments: Acquisition of 29% of Comercia Global Payments (August 2020)
  • NIH: Acquisition of DPO Group (July 2020)
  • Paysafe: Acquisition of Openbucks (July 2020)
  • Heidelpay Group: Acquisition of Paysafe Pay Later (July 2020)
  • Nexi: Acquisition of Intesa Sanpaolo's merchant acquiring business (July 2020)
  • MFS Africa: Acquisition of Beyonic (June 2020)

JVs:

  • TPAY Mobile: Middle East and North African mobile payments JV with Bango (December 2020)
  • Mastercard: Card issuing and processing JV with Marqeta (October 2020)
  • Klarna: E-commerce partnership with Macy's (October 2020)
  • Visa: Digital wallet platform JV with Vipps (September 2020)
  • American Express: Open banking JV with Yapity (August 2020)

Stockpiling growth capital:

  • Lydia: Successful €86 million Series B funding round, led by Accel (December 2020)
  • GoCardless: Successful US$95 million Series F funding round, led by Bain Capital Ventures (December 2020)
  • PhonePe: Successful US$700 million funding round (December 2020)
  • Ziglu: Successful £6 million crowd funding round (December 2020)
  • Primer: Successful £14 million Series A funding round, led by Accel (November 2020)
  • Cashfree: Successful US$35.5 million Series B funding round, led by Apis Growth (November 2020)
  • Chipper Cash: Successful US$30 million Series B funding round, led by Ribbit Capital (November 2020)
  • Satispay: Successful €93 million funding round, led by Square, Tencent, LGT LIghtsone and TIM Ventures (November 2020)
  • Modulr: Successful £9 million investment by PayPal Ventures (November 2020)
  • LinkAja: Successful US$100 million funding round, led by Grab (November 2020)
  • Score & Secure Payment: Successful €6 million funding round, led by Cegedim (November 2020)
  • Razorpay: Successful US$100 million Series D funding round, led by GIC and Sequoia (October 2020)
  • Marqeta: Minority equity investment by Mastercard (October 2020)
  • Veem: Successful US$31 million funding round, led by Truist Financial Corporation (September 2020)
  • Klarna: Successful US$650 million funding round, led by Silver Lake (September 2020)
  • Melio: Successful US$144 million funding round, led by Accel, Aleph, Bessemer Venture Partners, Coatue Management and General Catalyst (September 2020)
  • Thunes: Successful US$60 million Series B funding round, led by Helios (September 2020)
  • Mollie: Successful €90 million Series B funding round, led by TVC (September 2020)
  • Open Payments: Successful €3 million Seed funding round, led by Industrifonden (August 2020)
  • Form3: Successful £33 million Series C funding round, led by Lloyds (August 2020)
  • Routable: Successful US$12 million Series A funding round, led by Y Combinator (August 2020)
  • Remitly: Successful US$85 million Debt Financing funding round, led by PayU (July 2020)
  • Revolut: Successful US$80 million Series D funding round, led by TSG Consumer Partners (July 2020)
  • Episode Six: Successful US$7 million Series A funding round, led by HSBC (July 2020)

New technologies:

  • PayPal Ventures: £9 million equity investment in Modulr (November 2020)
  • Ripple: Equity investment in Money Tap (November 2020)
  • Mastercard: Participation in US$7 million Series A funding round for Episode Six (July 2020)

Diversification:

  • P27: Acquisition of Bankgirot (October 2020)

 

Early birds cash out

  • Pieter van der Does, Ingo Uytdehaage, Arnout Schuijff and Roelant Prins: Disposal of combined 15% of Adyen (August 2020)
  • UBI: Disposal of entire 0.572% shareholding in Nexi to Intesa Sanpaolo (August 2020)

 

Click here to download 'Financial services M&A stages a herculean comeback in H2 2020, finishing the year on a high' PDF.

 

 

This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2021 White & Case LLP

 

Top