Federal Regulatory Changes Could Slow Corporate Fintech Deals

In their recent Quarterly Fintech M&A Review, PitchBook gave us a detailed look at the big bank M&A scene. Here are some key points from their report:

– Corporate M&A activity is picking up steam: In the third quarter, acquisitions of B2B fintech companies increased by about 42% year over year. This positive trend signals the beginning of a sustainable recovery in corporate M&A. The interest in making acquisitions fluctuates with stock prices, revenue growth, FOMO, and overall performance. Notable acquisitions in Q3 were made by Stripe, Shift4 Payments, Pagaya, US Bank, and Paylocity.

– Private equity buyouts are on the rise: We’re seeing a real uptick in PE fintech buyouts. In Q3, the number of buyouts jumped by approximately 77% year over year, following a decline in the previous four quarters. This trend is supported by a significant increase in deal values, which reached $13.8 billion in Q3 compared to an average of $7.7 billion in the preceding four quarters. Lower interest rates and a strong economy are contributing factors to this trend.

– Acquisitions by public fintech companies are sluggish: Publicly traded fintech firms completed an estimated 33 acquisitions in 2024, compared to 34 in 2023 and an average of 62 from 2018 to 2022. This slowdown is partly due to decreased activity from companies like Stone Pagamentos, WeWork, PayPal, and certain deSPACs. However, active acquirers like Visa, Mastercard, Shift4, Corpay, WEX, and Nuvei continue to drive industry consolidation.

– The new federal regulatory stance may not significantly impact corporate fintech deals: While some large public fintechs, like Visa and Mastercard, could become slightly more acquisitive under the new administration, major acquisitions may still face challenges. Therefore, any acceleration in corporate fintech deals might not be drastic. Instead, we expect to see more activity in Big Bank M&A.

– Big Bank M&A is set to rebound: It’s predicted that the 30 largest US banks will complete 12 acquisitions in 2024, up from 10 in 2023. Despite the low deal count, the proposed acquisition of Discover by Capital One could push the total deal value to $46 billion, the highest in a decade. Active players in this space include American Express, First Citizens Bank, BMO Bank, Fifth Third Bank, and J.P. Morgan.

– The new administration’s policies may increase bank M&A: With a more lenient approach to banking M&A anticipated under the new administration, we could see a rise in deals. While regulators are cautious about allowing too-big-to-fail banks to grow even larger, smaller banks may engage in acquisitions to expand market share and acquire new technology assets.

Overall, the fintech M&A landscape is evolving, with various factors influencing deal activity across different segments of the industry. Stay tuned for more updates as the year progresses!