2019-01-15 Berkery Noyes Releases Financial Technology and Information Industry M&A Report For Full Year 2018

NEW YORK — January 15, 2019 — Berkery Noyes, an independent mid-market investment bank, today released its full year 2018 mergers and acquisitions trend report for the Financial Technology and Information Industry.

The report analyzes M&A activity for the sector during 2018 and compares it with data covering 2016 and 2017. This market includes information and technology companies in Capital Markets, Payments, Banking, Insurance, and other related financial services.

Transaction volume increased 15 percent on a year-to-year basis. Aggregate value rose 12 percent, from $43.29 billion to $48.57 billion. In terms of valuations, the median revenue multiple improved from 2.8x to 3.1x. Over the past three years, deals in the $10-$20 million range received a median enterprise value multiple of 1.3x revenue, compared to 1.9x revenue for those in the $20-$80 million range and 4.0x revenue for those in the $80 million and above range.

M&A volume in the Capital Markets segment increased 24 percent over the past year. Of note, eight of the overall industry’s top ten highest value transactions during 2018 occurred in the Capital Markets segment. SS&C Technologies’ was a notable segment acquirer with three of these eight deals: DST Systems, a provider of specialized technology, strategic advisory, and business operations outsourcing, for $5.64 billion; Intralinks Holdings, which offers secure data sharing and enterprise collaboration solutions that are used by the banking and capital markets sectors, for $1.5 billion; and Eze Software, an investment management software solutions company, for $1.45 billion.

Additional high profile Capital Markets deals during 2018 included:

• A Blackstone Group led consortium’s announced acquisition of a 55 percent stake in Thomson Reuters’ Financial & Risk division for $11 billion;
• State Street Corporation’s acquisition of Charles River Systems, a provider of investment management front office tools and solutions, for $2.6 billion;
• Ion Group’s announced acquisition of Fidessa, which provides software and services for investment management systems, analytics, and market data that serves both the buy-side and sell-side, for $2.02 billion (outbidding Temenos Group’s announced acquisition earlier in 2018);
• IHS Markit’s acquisition of Ipreo Holdings, which offers financial market information and software with a focus on alternative assets, for $1.86 billion; and
• Virtu Financial’s announced acquisition of Investment Technology Group, which offers solutions for asset managers and broker-dealers in the areas of execution services, workflow technology, and analytics, for $1.11 billion.

“Risk management and tracking tools, delivered in real-time, dovetail precisely with an environment ever more focused on analytics, regulatory constraints and pressures and investor driven transparency,” said Peter Ognibene, Managing Director at Berkery Noyes.

Deal activity in the Payment segment gained 16 percent from 2017 to 2018. Two of the industry’s top ten highest value deals during the year were Payments related. Along these lines were SilverLake and P2 Capital Partners’ acquisition of Blackhawk Network, a physical and digital gift card and prepaid payments network, for $3.62 billion; and PayPal’s acquisitions of iZettle, a mobile payments company that offers small businesses with portable point-of-sale solutions, for $2.2 billion.

Other high profile segment transactions included Edenred’s announced acquisition of Corporate Spending Innovations, which offers automated corporate payment software, for $600 million; PayPal’s acquisition of Hyperwallet, a digital payout provider aimed at the sharing and gig economies, for $400 million; GrubHub’s acquisition of LevelUp, an analytics, loyalty, and rewards-based mobile platform that connects restaurants and guests, for $390 million; and Visa’s announced acquisition of Fraedom, which provides payments and transaction management solutions for financial institutions and their corporate customers, for $200 million.

As for other select markets covered in the report, acquisition activity in the Banking segment increased four percent on an annual basis. Notable segment transactions in 2018 included Warburg Pincus’ announced acquisition of a majority stake in Fiserv’s lending solutions business for $419 million; News Corp subsidiary Move’s announced acquisition of Opcity, a real estate lead generation technology platform that matches buyers and sellers with real estate agents, for $210 million; and Q2 Software’s announced acquisition of Cloud Lending, an integrated platform for consumer, commercial, small business, construction, and equipment leasing, for $105 million.

“In today’s market, the burden of ensuring proper compliance has moved to the point-of-sale rather than only being part of closing, which falls on all mortgage industry participants and is having an impact on M&A activity,” stated John Guzzo, Managing Director at Berkery Noyes. “Before the credit crisis, compliance and auditing solutions were viewed by many as a “like-to-have” product and less of a “need-to-have” solution. But as compliance solutions are elevated to the need-to-have category, the focus on fraud prevention and risk mitigation will become increasingly strong.”

A copy of the FINANCIAL TECHNOLOGY AND INFORMATION INDUSTRY M&A REPORT FOR FULL YEAR 2018 is available at the Berkery Noyes website.