Competition between FinTech challengers and industry incumbents drove 2019 towards blockbuster mergers and acquisitions (M&A), with historically high deal counts and valuations.

This is according to the latest market report from M&A adviser Hampleton Partners, compiled using data from the 451 Research database.

Last year proved to be the second richest of the decade in terms of FinTech M&A activity, with 439 transactions and a disclosed transaction value of over $130 billion – almost twice the largest disclosed value recorded to-date ($71 billion in 2018).

Valuation multiples continued their rapid climb in the second half of 2019: the trailing 30-month median revenue multiple peaked at a record 3.8x, while the earnings before tax multiple jumped to 17.3x, just shy of the record set in the first half of 2015.

Four enormous M&A deals in 2019 set the record for the largest FinTech transactions ever recorded: Fidelity’s acquisition of Worldpay ($44 billion); Fiserv’s acquisition of First Data ($22 billion); the merger of Global Payments with Total System Services ($21 billion); and London Stock Exchange Group’s acquisition of Refinitiv ($14 billion). Combined, they accounted for a transaction value of almost $101 billion.

Jonathan Simnett, director at Hampleton Partners, said: “Traditional financial players are battling for relevance and scale – relevance being the ability to offer solutions that are ubiquitously available and in demand; and scale referring to the number of customers incumbents can gain and retain in the face of non-traditional competition.

“The new battleground requires new capabilities and incumbents must adapt and acquire now, or they will decline later.”

Simnett continued that FinTech M&A globally is expected to remain a hot sector heading into 2020, particularly given the large M&A deals that have taken place so far this year.

“The payments vertical will no doubt receive an abundance of investment, while InsurTech, RegTech and WealthTech are all well positioned for growth.

“Meanwhile, with large technology companies knocking at their doors, incumbent financial institutions must continue to engage aggressively with FinTech disruption, whether by building their own capabilities, by partnering or by acquiring, given the pace of innovation in the sector.”

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