Financial institutions M&A: Sector trends - July 2020
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Specialty Finance/Marketplace Lending

Financial Institutions M&A sector trends: Specialty finance/marketplace Lending — H1 2020 and outlook for H2 2020

Panacea or plague—-what will the true impact of accreditation for government-backed COVID-19 loan schemes be?



Current market

  • Flat

We are seeing

  • Niche lenders successfully attract capital— particularly SME (e.g., a55, AlphaCredit, Liberis and Swishfund) and working capital lenders (e.g., Financia & Go and Previse)
  • Established Public-to-Privates opt for partnerships to weather the COVID-19 pandemic (e.g., Funding Circle's and Zopa's partnerships with Starling)
  • Investors raise capital for future investment (e.g., HPS Investment Partners' US$1.5 billion EAVF II fund)

Key drivers/challenges

  • Wide universe of backers:
    • Trade consolidators—seeking share-of-wallet (e.g., Creditgate24's acquisition of Advanon and Foresight's acquisition of a majority stake in Signature Property Finance)
    • Financial sponsors—opportunity to conquer underserviced markets
    • Global FIs—seeking diversification through complementary bolt-ons (e.g., L&G's acquisition of 20% of Household Capital)
  • Governments tip their hats to speciality finance— accreditation for specialty finance providers to distribute government-backed COVID-19 relief loans (e.g., British Business Bank—accredited specialty finance providers for the UK's CBLIS and the Bounce Back Loan Scheme)

Trends to watch

  • COVID-19 accelerates decision on market longevity for marketplace lenders:
    • Will accreditation for government-backed loan schemes hand marketplace lenders a new lease on life? (e.g., Funding Circle for the UK's CBLIS scheme)
    • Will dependence on secondary markets for capital destroy investor confidence in the long-term?
    • Will central banks buy government-backed scheme loans from marketplace lenders? If so, at what price?
  • Consolidation amongst "challenger" lenders

Our M&A forecast

M&A is likely to remain relatively flat in the shortterm as the true impact of COVID-19 governmentbacked loan schemes is assessed by specialty finance businesses, financial sponsors and public market investors alike


Publicly reported deals & situations

Growing buyer/ investor/partner interest

Market highlight:

The UK Government launched a first-of-its-kind £250 million co-investment matching scheme, the Future Fund. Promising UK start-ups, many of which are specialty finance businesses, are able to relieve COVID-19 strain by securing up to £5 million in government loans, as long as the amount is matched by private sector investors. These loans can then be repaid, or converted into equity at a discount at the next funding round or after 3 years

Private equity / venture capital:

  • SoftBank (Supply chain finance): US$500 million equity investment in Credit Suisse's supply chain finance funds (June 2020)
  • KKR (Insurance financing): Equity investment in Kilter Finance (April 2020)

Payments giants:

  • Square (P2P): Acquisition of Verse (June 2020)


  • UniCredit (Supply chain finance): Supply chain finance JV with Taulia (June 2020)
  • Legal and General (Retirement finance): Acquisition of 20% of Household Capital (March 2020)

Trade consolidators:

  • Alliance Funding (Beverage finance): Acquisition of Pinnacle Capital Partners and Specialty Coffee Finance (June 2020)
  • Creditgate24 (Crowdfunding): Acquisition of Advanon (May 2020)
  • Finora Capital (Leasing): Acquisition of Inbank Liising (February 2020)
  • Foresight (Property finance): Acquisition of majority stake in Signature Property Finance (January 2020)

Speciality finance businesses scaling up

  • AskRobin (Marketplace lending): Successful US$1.7 million Seed funding round, led by Change Ventures (May 2020)
  • a55 (SME lending): Successful US$5 million Series A funding round, led by Santander InnoVentures (May 2020)
  • Flagstone (Cash deposit marketplace): Successful £12 million Venture funding round, led by Omes Ventures (May 2020)
  • Lendify (SME lending): Successful €13.6 million rights issue (April 2020)
  • Previse (Invoice financing): Successful US$11 million Venture funding round, led by Reefknot Investments and Mastercard (April 2020)
  • Household Capital (Retirement finance): Successful US$16.6 million Series B funding round (March 2020)
  • Demica (Working capital finance): Successful US$30 million Series C funding round, led by Simcah Management (January 2020)
  • Financia & Go (Invoice financing): Launch by Santander (January 2020)
  • AlphaCredit (SME Lending): Successful US$125 million Series B funding round, led by SoftBank (January 2020)
  • Liberis (SME Lending): Successful US$42 million funding round, led by FTV Capital (January 2020)
  • Swishfund (SME lending): Successful €15 million Series A funding round, led by Slingshot Ventures and Shoe Investments (January 2020)


Partnering to Starling brave the crisis

  • Funding Circle (UK): £300 million Coronavirus Business Interruption Loan Scheme strategic partnership with Starling (May 2020)
  • Zopa (UK): Consumer loan origination JV with (February 2020)


Readying for the push

  • HPS Investment Partners: Launch of US$1.5 billion EAVF II, which target the specialty finance sector (April 2020)


Government/ regulatory support Coronavirus Business

  • Interruption Loan Scheme (UK): 20 asset finance providers and 18 invoice finance providers accredited by British Business Bank (June 2020)
  • Bounce Back Loan Scheme (UK): Three non-bank lenders accredited by British Business Bank (June 2020)


Click here to download Financial services M&A experiences shortness of breath in H1 2020 (PDF)


Financial institutions M&A: Sector trends

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