Financial institutions M&A: Payments

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Financial institutions M&A sector trends: payments — H1 2021 and outlook for H2 2021

The COVID-19 pandemic drove e-commerce to levels never seen before—payment rail, service and solution providers responded with an unprecedented flurry of M&A activity.

Overview

CURRENT MARKET

  • Si...zzz...ling hot!

WE ARE SEEING

  • Investors with voracious appetites and deep pockets:
    • Private equity spots opportunities to repeat past glories (e.g., Finch Capital’s acquisition of Wirecard Turkey)
    • Late-stage investors supercharge IPO flightpaths (e.g., Blackstone’s investment in Mollie and Softbank Vision Fund 2’s investment in Klarna)
    • Venture capital back new entrants (e.g., Bankly, Diem, Bottlepay, Balance, Routefusion and Scalapay all successfully raised Seed capital in H1 2021)
    • Supermajors seek opportunities for diversification and improvement
    • First movers seek scale and scope (>17 consolidation deals in H1 2021)
  • Significant uptick in collaboration models:
    • Global behemoths favour expansion through JVs (e.g., Mastercard’s JVs with Ukheshe, NumberX and Razorpay)
    • Banks opt for partnerships (e.g., Deutsche Bank’s JVs with Fiserv and Silverflow)

KEY DRIVERS/CHALLENGES

  • Market consolidation:
    • Conquering geographic markets (e.g., Vipps, MobilePay & Pivo merger)
    • Expanding geographic reach (e.g., Nomu Pay’s acquisition of Wirecard’s Hong Kong, Malaysia, Philippines and Thailand businesses, and Clearpay’s acquisition of Pagantis)
    • Fully integrated service provision (e.g., Unzer’s acquisition of Clearhaus and QuickPay)
    • Bolstering commitment for digital currencies (e.g., PayPal’s acquisition of Curv)
    • Appetite for Open Banking (e.g., Visa’s acquisition of Tink and EML Payments’ acquisition of Sentenial)
  • COVID-19 has lasting impact on digital consumption—exponential growth in e-commerce:
    • Customer utilisation levels skyrocketed (Visa hit 1 billion additional PIN-free transactions)
    • First movers backed entrants into new territories and business lines (e.g., Zip’s minority equity investments in Spotii and Twisto)
  • Attaining the Holy Grail:
    • De-SPACs (e.g., Foley Trasimene Acquisition Corp. II’s acquisition of Paysafe and FTAC Olympus Acquisition’s acquisition of Payoneer)
    • IPOs (e.g., Wise’s LSE IPO and Affirm’s Nasdaq IPO)

TRENDS TO WATCH

  • Increasing expansion conservatism—withdrawal from underperforming markets (e.g., PayPal’s exit from Indian payments market)
  • Significant increase in payments regulation, in particular harmonisation of business practices, rules and technical standards across Europe’s card industry

OUR M&A FORECAST

Payments—Publicly reported deals & situationsStratospheric levels of M&A activity, as consumer demand continues to drive organic and inorganic expansion of solution and rail businesses across Europe. Many expect e-commerce growth to continue, notwithstanding cessation of COVID-19-induced lockdowns and travel bans.

Payments—Publicly reported deals & situations

Market highlight:

In less than 1 year since contactless limits increased across Europe, Visa has hit a processing milestone of 1 billion additional PIN-free transactions. Finextra (April 2021)

High appetite and deep pockets

PE/VC—acquisitions/equity investments:

  • Mission Holdings and Ally Ventures: Participation in US$50 million Series D funding round for Deserve (June 2021)
  • Blackstone: Participation in €665 million Series C funding round for Mollie (June 2021)
  • EQT Ventures: Participation in US$23.5 million Series A funding round for Volt (June 2021)
  • 9yards Capital and eFounders: Participation in US$15 million Series A funding round for Upflow (June 2021)
  • Softbank Vision Fund 2: Participation in US$639 million Series H funding round for Klarna (June 2021)
  • Advent International: Acquisition of stake in Planet Payment (June 2021)
  • SVB Capital: Participation in US$100 million Series C funding round for Chipper Cash (May 2021)
  • Global Ventures: Participation in US$8 million pre-Series A funding round for Mamo (May 2021)
  • Guru Capital: Acquisition of Oval Money (May 2021)
  • Altos Ventures: Participation in US$20 million Series A funding round for Candex (April 2021)
  • QED Investors: Participation in US$20 million Series A funding round for Payhawk (April 2021)
  • Gauss Ventures and M&F Funds: Participation in US$80 million Series B funding round for Zilch (April 2021)
  • x15ventures:
    US$1 million equity investment in Payable (April 2021)
  • Bain Capital: Participation in US$21 million post-Seed funding round for Orum (April 2021)
  • VC Global Ventures: Participation in US$18.5 million Series A funding round for PayMob (April 2021)
  • Vault: Participation in US$2 million Seed funding round for Bankly (March 2021)
  • Insight Partners: Participation in US$50 million Series C funding round for Pollinate (March 2021)
  • Inflexion: Minority equity investment in CMS Payments Intelligence (March 2021)
  • Fasanara Capital: Participation in US$5.5 million Seed funding round for Diem (March 2021)
  • Finch Capital: Acquisition of Wirecard Turkey (March 2021)
  • Avenir Growth Capital and Tiger Global Management: Participation in US$170 million Series C funding round for Flutterwave (March 2021)
  • FinTech Collective: Participation in £11 million Seed funding round for Bottlepay (February 2021)
  • Element Ventures: Participation in €4 million Series A funding round for Billhop (February 2021)
  • Coatue Management: Participation in US$108 million Series D funding round for BharatPe (February 2021)
  • Andreessen Horowitz, Greenfield One and Electric Capital: Participation in US$20 million funding round for Celo (February 2021)
  • TLV Partners: Participation in US$13 million funding round for Mesh Payments (February 2021)
  • SciFi VC: Participation in US$5.5 million Seed funding round for Balance (February 2021)
  • Silverton Partners: Participation in US$3.6 million Seed funding round for Routefusion (February 2021)
  • Fasanara Capital: Participation in US$48 million Seed funding round for Scalapay (January 2021)
  • SBI Investment and Sony Innovation Fund: Participation in US$15 million Series B funding round for Token (January 2021)
  • Addition: Participation in US$102 million Series B funding round for Fast (January 2021)
  • Elevator Ventures: Participation in €16 million Series C funding round for Twisto (January 2021)
  • Eurozeo Growth, Sprints Capital and Wellington Management: Participation in US$180 million funding round for PPRO (January 2021)
  • Coatue: Participation in US$300 million Series D funding round for Rapyd (January 2021)
  • IDC Ventures, Fuel Venture Capital and Vulcan Capital: Participation in US$95 million Series C funding round for Curve (January 2021)
  • Tiger Global Management: Participation in US$450 million Series C funding round for Checkout.com (January 2021)
  • Long Arc Capital: Participation in €25 million Venture funding round for TagPay (January 2021)

Supermajor investments:

  • Mastercard and Visa: Participation in US$40 million funding round for Greenwood
    (March 2021)
  • PayPal Ventures and American Express Ventures: Participation in successful Series A funding round for Codat (March 2021)

Institutional—acquisitions/equity investments:

  • National Bank of Egypt/Al Ahly Capital: Acquisition of 75% of Momken (March 2021)
  • Bank Pekao: Acquisition of 38.33% stake in Krajowy Integrator Płatności (Tpay) (April 2021)
  • EBRD and Goldman Sachs: Equity investment in DgPays (March 2021)

De-SPACs:

  • Foley Trasimene Acquisition Corp. II: Acquisition of Paysafe (March 2021)
  • FTAC Olympus Acquisition: Acquisition of Payoneer (February 2021)

IPOs:

  • Wise: London Stock Exchange IPO (June 2021)
  • Affirm: Nasdaq IPO (January 2021)

Scaling-up of market players

A trend for consolidation in the payments market continued between March and June 2021, with a flurry of sizeable deals taking place. S&P Global (June 2021)

Deal highlight:

White & Case advised Tink, a leading open banking platform provider which enables banks, fintechs and start-ups to develop data-driven financial services, on its sale to Visa for €1.7 billion.

Deal highlight:

White & Case advised Nets, the leading payment business in the Nordics, on its acquisition of Checkout Finland.

Mergers:

  • Vipps, MobilePay & Pivo: Merger (June 2021)

Acquisitions:

  • Openpay: Acquisition of Payment Assist (June 2021)
  • EML Payments: Acquisition of Sentenial (June 2021)
  • Nium: Acquisition of Ixaris (June 2021)
  • Bill.com: Acquisition of DivvyPay (June 2021)
  • Nomu Pay: Acquisition of Wirecard’s Hong Kong, Malaysia, Philippines and Thailand businesses (April 2021)
  • Hightech Payment Systems: Acquisition of 80% of ICPS (April 2021)
  • Ripple: Acquisition of 40% of Trianglo (March 2021)
  • Euronet Worldwide:
    Acquisition of Piraeus Bank’s merchant acquiring business (March 2021)
  • Clearpay: Acquisition of Pagantis (March 2021)
  • Clearpay:
    Acquisition of PMT Technology (March 2021)
  • PayPal:
    Acquisition of Curv (March 2021)
  • Mastercard: Acquisition of Nets’ corporate services business (March 2021)
  • PayPoint:
    Acquisition of RSM 2000 (February 2021)
    Unzer
    Acquisition of Clearhaus (January 2021)
  • Unzer:
    Acquisition of Clearhaus (January 2021)
  • Unzer:
    Acquisition of QuickPay (January 2021)
  • PayPal:
    Acquisition of GoPay (January 2021)
  • Nets/Paytrail:
    Acquisition of Checkout Finland (January 2021)

JVs:

  • Mastercard: WhatsApp payments JV with Nedbank and Ukheshe (April 2021)
  • Klarna: Revenue-based e-commerce financing JV with Liberis (June 2021)
  • SIA: Instant payments JV with Volante Technologies (June 2021)
  • Mastercard: Mobile payments JV with Zamtel (June 2021)
  • Visa:
    UAE mobile payments JV with Saudi Payments (June 2021)
  • Epay: Prepaid products JV with Revolut (May 2021)
  • Stripe: Middle East digital payments JV with Network International Holdings (April 2021)
  • Mastercard: App-based card JV with NumberX (March 2021)
  • Mastercard:
    Indian digital payments acceptance: JV with Razorpay (February 2021)
  • Visa:
    Crypto APIs JV with First Boulevard (February 2021)
  • Visa:
    Multi-currency debit card JV with TransferWise (January 2021)

Vertical integration:

  • Visa:
    Acquisition of Tink (June 2021)
  • Stripe and Thrive: Participation in US$35 million Series B funding round for Check (January 2021)

New licences/territories/business lines:

  • Mastercard: Participation in US$50 million Series D funding round for Deserve (June 2021)
  • Zip: Acquisition of minority equity stake in Spotii (May 2021)
  • Visa:
    Equity investment in Remitly
    (May 2021)
  • Checkout.com:
    Participation in US$110 million Series A funding round for Tamara (April 2021)
  • Zip:
    Participation in €16 million Series C funding round for Twisto (January 2021)

Service providers stockpile growth capital

  • Silverflow: Successful minority equity investment from Global PayTech Ventures (April 2021)
  • Deserve: Successful US$50 million Series D funding round, led by Mastercard, Mission Holdings and Ally Ventures (June 2021)
  • Mollie: Successful €665 million Series C funding round, led by Blackstone (June 2021)
  • Volt: Successful US$23.5 million Series A funding round, led by EQT Ventures (June 2021)
  • Upflow: Successful US$15 million Series A funding round from 9yards Capital and eFounders (June 2021)
  • DNA Payments: Successful £100 million investment from Alchemy Partners (June 2021)
  • Klarna: Successful US$639 million Series H funding round, led by Softbank Vision Fund 2 (June 2021)
  • Chipper Cash: Successful US$100 million Series C funding round, led by SVB Capital (May 2021)
  • Curve: Successful £10 million funding round (May 2021)
  • Paysend: Successful US$125 million Series B funding round, from Infravia Growth Capital, Hermes GPE Innovation Fund and Plug and Play (May 2021)
  • Pine Labs: Successful US$285 million funding round, led by Baron Capital Group, Duro Capital, Moore Strategic Ventures and Ward Ferry Management (May 2021)
  • Mamo:
    Successful US$8 million pre-Series A funding round, led by Global Ventures (May 2021)
  • Tamara:
    Successful US$110 million Series A funding round, led by Checkout.com (April 2021)
  • Candex:
    Successful US$20 million Series A funding round, led by Altos Ventures (April 2021)
  • Payhawk:
    Successful US$20 million Series A funding round, led by QED Investors (April 2021)
  • Zilch:
    Successful US$80 million Series B funding round, led by Gauss Ventures and M&F Fund (April 2021)
  • Cardlay:
    Successful €8 million Series B
    funding round, led by Global PayTech Ventures (April 2021)
  • Payable: Successful US$1 million equity investment from x15ventures (April 2021)
  • Orum: Successful US$21 million post-Seed funding round, led by Bain Capital (April 2021)
  • PayMob: Successful US$18.5 million Series A funding round, led by VC Global Ventures (April 2021)
  • Bankly: Successful US$2 million Seed funding round, led by Vault (March 2021)
  • DgPays: Successful equity investment from EBRD and Goldman Sachs (March 2021)
  • Pollinate: Successful US$50 million Series C funding round, led by Insight Partners (March 2021)
  • Airtel Africa Mobile Money: Successful US$200 million investment from The Rise Fund (March 2021)
  • CMS Payments Intelligence: Successful minority investment from Inflexion (March 2021)
  • Diem: Successful US$5.5 million Seed funding round, led by Fasanara Capital (March 2021)
  • Flutterwave: Successful US$170 million Series C funding round, led by Avenir Growth Capital and Tiger Global Management (March 2021)
  • Klarna:
    Successful US$1 billion funding round (March 2021)
  • Billhop:
    Successful €4 million Series A funding round, led by Element Ventures (February 2021)
  • BharatPe:
    Successful US$108 million Series D funding round, led by Coatue Management (February 2021)
  • Celo:
    Successful US$20 million Series A funding round, led by Andreessen Horowitz, Greenfield One and Electric Capital (February 2021)
  • Mesh Payments:
    Successful US$13 million Venture funding round, led by TLV Partners (February 2021)
  • Balance:
    Successful US$5.5 million Seed funding round, led by SciFi VC and Stripe (February 2021)
  • Routefusion:
    Successful US$3.6 million Seed funding round, led by Silverton Partners (February 2021)
  • Scalapay:
    Successful US$48 million Seed funding round, led by Fasanara Capital (January 2021)
  • Synch Payments:
    Successful €5.9 million Seed funding round led by AIB, Bank of Ireland, Permanent TSB and KBC Bank Ireland (January 2021)
  • Token:
    Successful US$15 million Series B funding round, led by SBI Investment and Sony Innovation Fund (January 2021)
  • Wyre:
    Successful US$5 million Venture funding round, led by Stellar Development Foundation (January 2021)
  • Fast:
    Successful US$102 million Series B funding round, led by Addition and Stripe (January 2021)
  • Alma:
    Successful €49 million Series B funding round, led by Cathay Innovation and Idinvest (January 2021)
  • Twisto:
    Successful €16 million Series C funding round, led by Zip and Elevator Ventures (January 2021)
  • PPRO:
    Successful US$180 million funding round, led by Eurazeo Growth, Sprints Capital and Wellington Management (January 2021)
  • Grab:
    Successful US$300 million late-stage funding round, led by Hanwha (January 2021)
  • Rapyd:
    Successful US$300 million Series D funding round, led by Coatue (January 2021)
  • Curve:
    Successful US$95 million Series C funding round, led by IDC Ventures, Fuel Venture Capital and Vulcan Capital (January 2021)
  • Checkout.com:
    Successful US$450 million Series C funding round, led by Tiger Global Management (January 2021)
  • TagPay:
    Successful €25 million Venture funding round, led by Long Arc Capital (January 2021)

Banks opt for partnership model

  • Deutsche Bank: Payments acceptance JV with Fiserv (June 2021)
  • Goldman Sachs:
    Digital payments JV with Visa (June 2021)
  • Deutsche Bank: Cloud-based card acquiring services JV with Silverflow (May 2021)
  • BankDhofar: Payment solutions JV with Thawani Technologies (April 2021)
  • Railsbank:
    Digital wallet JV with Yimba (April 2021)

Click here to download 'Financial services M&A reaches dizzying heights as COVID-19 lockdowns and travel bans come to an end' PDF

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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