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Financial institutions M&A: Sector trends - January 2021
Insight

Payments

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

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.

 

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