Financial institutions M&A: Payments

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)

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