Back
Financial institutions M&A: Sector trends - February 2020
Financial Institutions M&A: Sector trends - June 2019
Insight

Specialty Finance/Marketplace Lending

Financial institutions M&A sector trends: specialty finance/marketplace lending — H2 2019 and outlook for 2020

The UK Financial Conduct Authority's new P2P rules add to pressures faced by UK platforms.

 

Overview

CURRENT MARKET

  • Flat; marginal uptick

WE ARE SEEING

  • Funding rounds:
    • By established as well as new market participants
    • In the form of equity as well as debt
    • Backed by financial sponsors as well as established banks
  • Established market participants scaling up, particularly through bolt-on acquisitions and partnerships
  • Collapse of weaker business models—FundingSecure, Lendy and Collateral all went bust in 2019

KEY DRIVERS/CHALLENGES

  • Diverse spectrum of investors:
    • Trade consolidators—seeking market share (e.g., Goldmoney acquisition of Lend & Borrow Trust) and embracing digitalisation (e.g., Morses Club's acquisition of U Holdings)
    • Banks—lower cost of capital associated with debt investments (e.g., National Australia Bank's £200 million debt investment in LendInvest)
    • Financial sponsors—opportunity to secure earlybird stakes in new entrants targeting under-serviced markets (e.g., revenue-based financing/royalty-based financing)
  • Pressure from the UK Financial Conduct Authority's new P2P rules, which restrict access to sophisticated, high-net-worth individuals or those who commit to limiting their investing to 10% of assets

TRENDS TO WATCH 

  • Differing regulatory prerogatives:
    • Consumers—protecting ‘vulnerable' retail investors
    • Ensuring alternative finance providers thrive and service market needs

OUR M&A FORECAST

Growing support for alternative finance providers able to proffer financial inclusion for underserviced entrepreneurs and SMEs, particularly in emerging markets where bank credit is less readily accessible.

 

Publicly reported deals & situations

Scaling up

Marketplace lending is expected to top £6 billion in 2019 (AltFi–November 2019)

Equity/debt investments:

  • Zopa: Successful £140 million Series H funding round, led by IAG Capital (December 2019)
  • Duke Royalty: Successful £20 million open offer, retail offer and further direct subscriptions (October 2019)
  • CrossLend: Successful €35 million Series B funding round, led by Santander InnoVentures (October 2019)
  • LendInvest: £200 million debt investment from National Australia Bank (August 2019)

Acquisitions:

  • Goldmoney: Acquisition of Lend & Borrow Trust (August 2019)
  • Morses Club: Acquisition of U Holdings (June 2019)

Alliances:

  • Fellow Finance: Consumer loans JV with Citadeal Bank (November 2019)
  • Funding Circle: German and Dutch SMEs lending JV with Avida Finans (June 2019)

 

New entrants

  • ID Finance: Successful £4.4 million crowdfunding round (November 2019)
  • Become: Successful US$12.5 Series A funding round, led by Magenta Venture Partners (November 2019)

 

Growing pressure on P2Ps

  • ThinCats: Closure of its P2P platform (December 2019)
  • FundingSecure: 
    Collapse into administration
    (October 2019)

 

Click here to download 'Financial services M&A finished strong in 2019 ' PDF

 

FULL MAGAZINE
Financial institutions M&A: Sector trends

SUBSCRIBE
Stay current on your favorite topics

 

This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2020 White & Case LLP