Financial institutions M&A: Specialty Finance/Marketplace Lending

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Financial institutions M&A sector trends: specialty finance/marketplace lending — H1 2021 and outlook for H2 2021

M&A levels dipped in H1 2021. Whilst institutional banks backed trade and B2B finance platforms and VC supported P2P, SME and treasury finance disruptors, both investor categories required convincing to part with cash.

Overview

CURRENT MARKET

  • Moderate decline in M&A activity

WE ARE SEEING

  • Investment interest from:
    • Institutional banks (e.g., Barclays' investment in Hubx)
    • Venture capital (e.g., IAG Silverstripe's investment in Zopa)
    • Other FIs (e.g., Schroders' acquisition of 50.1% of RF Eclipse)
  • First movers scaling up:
    • Through acquisitions (e.g., Arbuthnot's acquisition of Asset Alliance)
    • Through fundraisings (e.g., >6 specialty European finance businesses stockpiled growth capital in H1 2021)

KEY DRIVERS/ CHALLENGES

  • Institutional banks back:
    • Trade finance platforms (e.g., Sumitomo Mitsui Banking’s investment in TradeIX)
    • B2B finance platforms
  • Financial sponsors back:
    • SME lenders (e.g., ThinCats’ £160 million fundraising)
    • P2P lending (e.g., Beehive and Zopa both raised funding in H1 2021)
    • Real estate lending (e.g., CrowdProperty’s £1.1 million crowdfunding)
    • Treasury finance (e.g., TreasurySpring’s US$10 million Series A funding round)
  • Climate-friendly lenders attract interest:
    • Electric vehicle leasing (e.g., MisterGreen’s €50 million fundraising)
    • Impact investing (e.g., Remagine’s €20 million Seed fundraising)

TRENDS TO WATCH

  • P2P platforms growing more rapidly in Europe (as compared to the UK) on account of Brexit
  • Only the strong P2P platforms will survive:
    • Strength: Certain European P2P platforms were accredited to provide government-backed SME loans
    • Weakness: Certain European P2P platforms were forced to amend lending criteria in response to the COVID-19 pandemic

OUR M&A FORECAST

M&A is likely to remain relatively flat in the short-term as the COVID-19 pandemic promulgates natural selection between strong and weak specialty finance businesses.

Specialty Finance/Marketplace Lending—Publicly reported deals & situations

Growing buyer/ investor/ partner interest

In the past couple of years, the European P2P investing market has more than doubled. The market is currently valued at US$67.93 billion and is projected to grow at a compound annual growth rate of 29.7% from the year 2020 to 2027. SWAPER (February 2021)

Institutional banks:

  • Sumitomo Mitsui Banking (Trade finance): Equity investment in TradeIX (April 2021)
  • Barclays (B2B capital raising platform): Participation in US$5.5 million Series A funding round for Hubx (February 2021)

Private equity/venture capital:

  • IAG Silverstripe: Participation in £20 million funding round for Zopa (May 2021)

Trade consolidators:

  • Opendo (Operating leasing): Acquisition of Alm. Brand Leasing (February 2021)
  • Sydbank (Finance leasing): Acquisition of 10.4% of Opendo (February 2021)
  • Cazoo (Leasing): Acquisition of Cluno (February 2021)

FI:

  • Schroders: Acquisition of 50.1% of RF Eclipse (April 2021)

Specialty finance businesses scaling up

Acquisitions:

  • Arbuthnot (Leasing): Acquisition of Asset Alliance (April 2021)
  • DORI Vermögensverwaltungs (Leasing): Acquisition of 36% of adesion Factoring (January 2021)

Stockpiling growth capital:

  • ThinCats (Alternative finance): Successful £160 million equity investment from Wafra Capital Partners and Quilam Capital (June 2021)
  • TreasurySpring (Treasury finance): Successful US$10 million funding round, led by MMC Ventures and Anthemis Group (June 2021)
  • Beehive (P2P lending): US$8.1 million capital injection from Emirates Development Bank (June 2021)
  • MisterGreen (Leasing): Successful €50 million fundraising (May 2021)
  • Zopa (P2P lending): Successful £20 million investment from existing investors (March 2021)
  • Remagine (‘Impact’ financing platform): Successful €20 million Seed funding round (January 2021)

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

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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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