UK Fintech M&A to heat-up in 2018 | KPMG | UK

UK Fintech M&A to heat-up in 2018

UK Fintech M&A to heat-up in 2018

UK fintechs attracted $4.2bn total investment in 2017, up from $0.7bn the year before.

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The UK accounted for over half of the total European fintech investment ($7.4bn) and 14% of the global total ($31bn), according to the KPMG Pulse of Fintech report.

Anton Ruddenklau, Partner & head of digital & innovation, financial services, KPMG in the UK adds:
The UK’s fintech market remains remarkably resilient. The final quarter of 2017 saw the most deal activity since 2014, largely driven by payment companies. As we enter a world of open banking, I expect that to continue. Large financial institutions still have deep investment pockets, the big banks want to get involved in fintech and acquire start-ups to help meet their growth ambitions. We’re likely to see more purchasing than investment through 2018.

London continues to act as the magnet for the UK with several large deals, including TransferWise’s $280m VC funding round and Trayport’s $727m acquisition, providing a significant boost to the UK’s total fintech investment.

Rachel Bentley, fintech specialist with KPMG’s innovative start-ups practice in London said:London was one of the earliest fintech innovation centres so it now has a large number of mature businesses with good traction in the market, clear paths to profitability, and strong value propositions for investors. This maturity has helped the UK market to remain resilient in an uncertain economy and later stage investment definitely helped to boost the numbers in the final quarter. At the same time, a positive regulatory climate and strong fintech ecosystem continues to attract new start-ups and we are also seeing earlier stage activity across the sector, reflecting the diversity of the UK market and a positive sign for future fintech investment.

Ends

Key 2017 Annual Highlights
• Total global fintech investment was $31bn, the same level of investment as 2016.
• The number of PE deals reached a record high of 139 in 2017, providing $17bn in investment.
• 2017 saw the third-highest annual total for VC fintech investment of the decade.
• The median deal size for angel/seed-stage deals was up to $1.5m, compared to $1m in 2016, while the median deal size for early-stage rounds was also up to $5.5m from $5.1m in 2016. The median deal size of late-stage deals decreased year-over-year, from $19.1m to $16m.
• Corporate participation in VC deals reached a record high of 19 percent in 2017, although VC investment with corporate participation globally was down significantly year over year, with just $5.4bn invested in 2017 compared to $9.7bn invested in 2016.

Key Q4’17 Highlights
• Global fintech investment rose marginally from $8.5bn in Q3’17 to $8.7bn in Q4’17.
• Global fintech deal activity dropped to 307 deals in Q4’17, from 327 in Q3’17, with VC deals dropping from to 227 from 250. While noticeable, the decline in fintech deal activity has been far more moderate compared to declining deal activity in other technology sectors.
• Global VC funding dipped slightly from $3.7B to $3.2B quarter over quarter.
• Fintech exit activity achieved a new high of $2.4B in Q4’17, highlighting the growing maturation of some fintech subsectors.

“The fintech market is continuing to expand and evolve,” says Murray Raisbeck, Global Co-Lead, KPMG Fintech. “So much is happening – from the increasing focus on insurtech and blockchain, to the ramifications of maturing companies, such as challenger banks, looking to expand and grow. With regulations changing, particularly in Europe – 2018 will likely be an exciting year.”

US dominates global fintech investment; Brazil starts to make waves

Fintech funding in the Americas rose slightly quarter-over-quarter, with $5.9bn invested across 168 deals. In total for 2017, the Americas saw $19.8bn invested across 711 deals.

While the US accounted for the lion’s share of fintech investment, with $5.8bn invested across 149 deals during Q4’17, Brazil had an excellent showing, with a $50m raise by Creditas breaking into the top 10 fintech deals in the region.

Asia fintech funding declines, with less than $750 million raised in the region.
After a solid $1bn+ quarter in Q3’17, total fintech funding in Asia declined to $748m across 36 deals in Q4’17. VC funding faltered considerably in the region, dropping almost 50 percent quarter over quarter to $550m. Decreased fintech investment in China accounted for much of the decrease in investment in Asia. China saw just $145.8m in investment in Q4’17, while total investment in 2017 was $1.5b.

On an annual basis, total fintech funding in Asia was $3.85b in 2017 – a massive drop-off from the more than $10.8b invested in 2016. On the positive side, corporate participation in fintech deals skyrocketed in Asia during Q4’17, rising from a twelve-quarter low of 11 percent in Q3’17 to reach a new high of over 31 percent.

For more information, contact:
Christina Bridge
M : 07789504905
E : Christina.Bridge@KPMG.co.uk

Emma Murray
M : 020 76946506
E : Emma.Murray@KPMG.co.uk

About KPMG Fintech
The Financial Services industry is transforming with the emergence of innovative new products, channels and business models. This wave of change is driven by evolving customer expectations, digitalization, as well as continued regulatory and cost pressures. We are passionate about supporting clients to successfully navigate this transformation, mitigating the threats and capitalizing on the opportunities. KPMG Global Fintech comprises professionals in over 35 fintech hubs around the world, working closely with financial institutions and fintech companies, to help them understand the signals of change, identify the growth opportunities and to develop and execute on their strategic plans.

About KPMG in the UK
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 14,500 partners and staff. The UK firm recorded a revenue of £2.2 billion in the year ended 30 September 2017. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 152 countries and has 189,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

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