2017-01-13 Berkery Noyes Releases Financial Technology and Information Industry M&A Report For Full Year 2016
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NEW YORK — January 13, 2017 — Berkery Noyes, an independent mid-market investment bank, today released its full year 2016 mergers and acquisitions trend report for the Financial Technology and Information Industry.
The report analyzes M&A activity for the sector during 2016 and compares it with data covering 2014 and 2015. This market includes information and technology companies in Capital Markets, Payments, Banking, Insurance, and other related financial services.
Transaction volume remained about constant on a year-to-year basis. Aggregate value decreased 26 percent, from $65.29 billion to $48.41 billion. Relative to 2014, volume improved 15 percent and value gained 72 percent. The industry’s largest transaction in 2016 was Deutsche Börse Group’s announced merger with London Stock Exchange Group for $14.68 billion in an all-stock deal. In addition, four of the industry’s top five deals by value during the year involved major exchange operators in the Capital Markets segment.
In terms of valuations, the median revenue multiple declined from 3.2x to 2.3x, while the median EBITDA multiple improved from 11.4x to 13.1x. Over the past three years, deals in the $10-$20 million range received a median enterprise value multiple of 1.8x revenue, compared to 1.6x revenue for those in the $20-$80 million range and 4.1x revenue for those in the $80-$160 million range and above.
The Payments segment experienced an 18 percent rise in volume in 2016. Upon examination of value, three of the industry’s top ten largest acquisitions during the year occurred in the segment. Along these lines were TSYS’ acquisition of TransFirst, a provider of secure transaction processing services and payment enabling technologies, which was acquired from Vista Equity Partners for $2.33 billion; MasterCard’s announced acquisition of VocaLink, a payments infrastructure solutions company, for $924 million; and Haili Metal One’s acquisition of Union Mobile Pay, a provider of e-commerce products and services in China, for $462 million.
“Worldwide markets are rapidly developing modernized credit and transfer infrastructure, adding further growth to an already sizeable market,” said Peter Ognibene, Managing Director at Berkery Noyes. “Ecosystem players are also pushing hard on experimenting with beta technologies particularly associated with mobile telephony, social media and peer-to-peer, digital and crypto-currency.” Ognibene continued, “Key business problems to be solved include fraud detection and elimination, utilization of multiple payment methods, aggregation of as many customer streams as possible, convergence of industry utilization and global growth of electronic payments.”
M&A volume in the Capital Markets segment, after rising 43 percent in 2015, declined seven percent over the past year. Notable segment deals in 2016 below the $1 billion threshold included Synchronoss Technologies’ announced acquisition of Intralinks Holdings, a provider of enterprise collaboration software for secure document sharing and virtual data rooms, for $821 million; E*TRADE Financial Corporation’s acquisition of OptionsHouse, an online stock and option broking company that provides trading platforms for retail and institutional options traders and investors, for $725 million; Ally’s acquisition of TradeKing, an online brokerage and digital wealth management company, for $275 million; Morningstar’s acquisition of Pitchbook Data, a research firm that focuses on private equity, venture capital, and mergers and acquisitions, for $180 million; and Broadridge Financial Solutions’ acquisition of the technology assets of INVeSHARE, a provider of regulated shareholder communications, for $135 million.
As for other markets covered in the report, acquisition activity in the Banking segment decreased 13 percent on an annual basis, from 90 to 78 deals. This followed a 45 percent increase in 2014. Notable Banking deals over the past year included GTCR’s acquisition of Optimal Blue, a cloud-based technology provider that offers enterprise lending services to mortgage originators and investors, for $350 million; Becker Professional Education’s acquisition of the Association of Certified Anti-Money Laundering Specialists (ACAMS), an international membership organization dedicated to enhancing the knowledge and skills of anti-money laundering and financial crime prevention professionals, for $330 million; and Black Knight Financial Services’ acquisition of eLynx, a provider of data-centric document collaboration, distribution, and connectivity services for the financial services and real estate sectors, for $115 million.
“There are several significant drivers impacting the evolution of mortgage technology,” stated John Guzzo, Managing Director at Berkery Noyes. “This includes restoring consumer confidence, decreasing the volume of delinquent loans, stabilizing the debt markets and adhering to new regulatory guidelines.” Guzzo continued, “Mortgage technology vendors and outsourcers offering solutions that provide better quality control, promote process efficiencies, facilitate borrower communication and improve regulatory compliance are in demand by investors and acquirers. Moreover, acquirers are looking for products to round-out their solutions suite and to gain customers and market share.”
Regarding the industry’s Insurance segment, volume increased 21 percent, from 62 to 75 transactions. The largest related deal in 2016 was CSC Corporation’s acquisition of Xchanging, which provides technology-enabled business solutions to the global commercial insurance industry, for $767 million. This was the only deal in the segment to reach the overall industry’s list of top ten highest value transactions during the year.
A copy of the FINANCIAL TECHNOLOGY AND INFORMATION INDUSTRY M&A REPORT FOR FULL YEAR 2016 is available at the Berkery Noyes website.