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

White & Case LLP

White & Case LLP 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?




  • 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)


  • 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)


  • 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


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)

[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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