According to boutique advisor Hampleton Partners, the fintech market is due to leap into a maturity phase denoted by an influx of IPOs and M&A consolidation.
The prediction arrives after the fintech investment was reported to have reached record highs of $39.6 billion in 2018.
Investment in fintech start-ups peaked in 2018, reaching a total disclosed transaction value of $30.8 billion – the highest ever recorded – according to the latest Fintech M&A Report from Hampleton Partners. The figure is more than double that recorded in 2017.
As fintech start-ups develop, the average funding round in 2018 has doubled in size compared to the previous year, with the Asia-Pacific region leading the race.
During the first half of 2018, fintech M&A transaction value hit $50 billion from 189 transactions. This figure however, was not repeated in the last six months of 2018, when activity cooled, recording 160 transactions totalling to a disclosed transaction value slightly short of $13 billion.
The decline in transaction value was largely attributed to the absence of disclosed blockbuster deals, similar to the likes of Blackrock’s $17 billion acquisition of Thomson Reuters in 1H2018.
On a 30-month average basis, trailing multiples extended their upward climb: revenue multiples reached 3.0x, up from 2.9x in 1H 2019, while EBITDA multiples hit 15.3x, up from 15.0x in 1H2018.
“Going forward, it is anticipated that the largest fintech firms will soon realise value through IPO in 2019. Meanwhile, most start-ups that have grown large enough to gain traction, attract a strong customer base and produce a profitable balance sheet, will remain small enough to be acquired by fintech and traditional incumbents leading to an ongoing process of consolidation and M&A,” said Jonathan Simnett, director and fintech specialist at Hampleton Partners.