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The long-awaited arrival of Europe’s new breed of decacorns – White & Case LLP

UK & European Financial Services M&A: Sector trends H2 2021 | H1 2022 — Fintech
The last 12 months have ushered in a new era for Europe’s fintechs—we are now seeing significant M&A as fintechs look at market consolidation with a path to profitability being a key driver.
Daniel Turgel
Europe has bucked the global trend of tightening private capital purse strings. While successful funding rounds rage on, fintechs with critical mass are deploying M&A strategies to consolidate horizontally and integrate vertically.
Europe bucks the global trend of tightening private capital purse strings. 3 trends which have driven the level of M&A activity to dizzying heights: 

Continuing high M&A activity level. Continued heavy fintech outlay by Europe’s banks as they progress their digital transformation journeys. Those European banks which have been focusing efforts on other strategic prerogatives will inevitably join the technology race, and will run hard to keep pace with their competitors. Financial sponsors will continue to write equity cheques but are likely to demand more ban for their buck (particularly in respect of deliverability of business plans). The inflexion point for Europe’s fintech ecosystem is approaching…
White & Case advised Bank of America Strategic Investments Corporation, the venture capital arm of Bank of America, as lead investor in the US$20 million Series A funding round of Banked.
Lloyds is to spend £1 billion over the next 3 years on overhauling its technology infrastructure and self-service capabilities. (Finextra, March 2022)
A quarter of UK lenders now use Open Banking technology, with half of those that do not plan to do so in the future. (Finextra, December 2021)
Traditional banks could increase their annual revenues by nearly 4% if they embrace the innovative business models used by digital-only players. (Finextra, November 2021)
Standard Chartered has set out a medium-term ambition to generate 50% of its income from digital initiatives, innovation and transformation of its core. (Finextra, October 2021)
More UK financial institutions are targeting acquisitions and partnerships with fintech firms to boost their position in the post-pandemic market. (Finextra, October 2021)
White & Case advised SoftBank Vision Fund II on its participation, as lead investor, on: the US$130 million Series B funding round of Envelop Risk Analytics, the risk analytics fintech; and the £220 million pre-IPO funding round of Zopa, the world’s first peer-to-peer lending platform.
White & Case advised Aquiline Capital Partners on its acquisition of VirtusLab, the software development business active across the UK, Poland and Germany.
White & Case advised EQT on its disposal of Iver Holding, a Sweden-based IT outsourcing business, to Intermediate Capital, the UK-based global alternative asset manager.
White & Case advised Gopher Investments on its acquisition of Finalto the financial trading division of London Stock Exchange-listed Playtech.
Global fintech funding clocked in at US$28.8 billion in Q1 2022, down 18% quarter-over-quarter, the largest percentage drop in quarterly funding since 2018. (Finextra, April 2022)
VC funding for fintechs driving net-zero economies hit a record high in 2021—at US$1.2 billion in 2021, VC funding for climate fintechs was 3 times higher than in all previous years. (Finextra, February 2022)
UK has registered a record year in annual fintech investment in 2021, exceeding US$11.6 billion–representing a huge 217% increase from 2020. (Finextra, January 2022)
Record levels of private and VC funding for European fintech companies could diminish in 2022 as mature startups focus on M&A and multiple emerging factors tar their growth. (Finextra, October 2021)
VC investments in British fintech has reached an all-time high of US$4.9 billion in Q3 2021, taking total funding to US$11.4 billion for the first 9 months of 2021. (S&P Global, October 2021)
White & Case advised Zip, a global leader in digital retail finance and pyment systems, on its acquisition of 60% of Hemenal Finansman, the Turkish consumer finance business from OYAK Portföy Yönetimi.
White & Case advised Tink, a leading Nordic open banking platform provider, on its acquisition of FinTecSystems, a leading German open banking infrastructure operator.
White & Case advised Klarna, one of European’s most high profile fiech unicorns, on: its acquisition of discount browser extension Piggy; and its acquisition of Hero Towers, the UK’s leading ‘social shopping’ e-commerce platform.
White & Case advised Trustly, the Nordic Capital–backed open banking business, on its acquisition of Ecospend Technologies, a leading provider of ‘pay-by-bank’ services.
Share prices of many listed finech fims have fallen sharply since the autumn, which could offer banks and other established financial fms opportunities to buy finech businesses. (Finextra, February 2022)
Fintech fims racing to expand and bundle consumer finech offerings spurred M&A in 2021, and the momentum will continue. (S&P Global, January 2022)
InsurTech companies have attracted much less investment than peers targeting other parts of the financial secor. (Financial Times, January 2022)
Fintechs are buying established lenders to secure bank charters while avoiding a long and increasingly scrutinized application process. (Finextra, December 2021)
Ron Kalifa is predicting more merger activity in the sector, as fims fight it outfor profitabiity. (Financial News, November 2021)
White & Case advised Bud Financial, the AI-based open banking platform, on its US$80 million Series B funding round, led by TDR Capital.
White & Case advised Pollinate, the UK-based merchant acquiring pioneer, on: its US$20 million Series C follow-on funding round, led by Canadian Imperial Bank of Commerce; and its US$30 million Series C+ funding round, supported by existing investors including Insight Partners, NatWest, NAB, EFM Asset Management and Fiserv.
White & Case advised N26, Berlin-based neo-banking unicorn, on certain regulatory and compliance considerations in the context of its US$900 million Series E funding round.
UK’s technology ecosystem is now worth US$1 trillion, with fintech dominating the list of most valuable firms. (Finextra, March 2022)
Total UK fintech investment hit US$37.3 billion in 2021, up sevenfold from US$5.2 billion in 2020. (Finextra, February 2022)
A total of 26 European fintech unicorns—companies that have a post-money valuation of US$1 billion or more—were created in 2021. Europe was home to 45 fintech unicorns as of 20 January 2022. (S&P Global, February 2022)
After a whirlwind decade that has seen more than 1,000 startups launch and go on to raise over £11 billion between them, the UK fintech scene is starting to mature, with investment in early-stage rounds slowing. (Finextra, September 2021)
InsurTech drew US$7.4 billion in investments in H1 2021, with the latest quarter seeing 162 deals that yielded more than US$4.82 billion in investment: a 210% year-over-year increase. (S&P Global, July 2021)
International Monetary Fund says fast-growing fintechs pose challenges for both regulators and less technologically advanced banks, whose long-term viability may be under threat. (Finextra, April 2022)
Bank for International Settlements has said tech companies that play a critical role in payments and other areas should be subject to stricter regulatory scrutiny that considers issues beyond traditional market risks. (Financial News, August 2021)
Click here to download ‘The long-awaited arrival of Europe’s new breed of decacorns’ PDF
Financial institutions M&A: Sector trends

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