Global menu

Our global pages

Close

6th Annual Digital Financial Services and Fintech Conference: FS investment and M&A trends – riding the Technology wave

  • Global
  • Financial services - Digital Financial Services

11-12-2020

 

The key investments, developments and advancements in FS, M&A and Fintech of 2020 were discussed by a panel moderated by Jon Cox-Brown, Corporate Partner and co-leader of the Eversheds Sutherland FS M&A group. Ankit Chhabra, author of the Eversheds Sutherland global FS M&A report, began the session by providing highlights from the report. Ankit noted how analysis showed that 2019 was a “stellar year” for FS, M&A and Fintech investment activity with things, unsurprisingly, taking a “nosedive” with the emergence of the pandemic. The FS sector, however, remained resilient with funding in Fintech and average deal value both increasing during 2020. Ankit explained how Fintech was one of the main reasons why the financial sector had remained resilient during the pandemic and drove M&A activity. M&A dependence on Fintech is likely to increase, as the driving force behind Fintech itself is the change in consumer business and behaviour with an increased use of e-commerce across society and a generational change of younger, digitally connected individuals seeking access to financial services. Interestingly, more traditional financial investors are now looking to invest in Fintech showing that, despite the uncertainty, “investors are still backing good ideas” and at an earlier stage.

In the view of Anuj Bhardwaj, an Investment Director at Experian Ventures, the pandemic has changed the way we look at deals for good. Anuj stated that, going forward, the three key points when valuating ventures will be (1) a focus on long term trends; (2) deciding whether a product is a necessity; and (3) an understanding of operating leverage, irrespective of business model. The long term effects of Covid on contractual provisions such as material adverse effect clauses and interim operating covenants in M&A negotiations (“what is ‘the ordinary course’ in the context of a pandemic?”) was raised by Brian Murphy, a Partner at Eversheds Sutherland US, with the impact on customers in turn impacting the Fintech sector. Eversheds Sutherland Partner Eve England discussed the challenges for lawyers of dealing with businesses with new and innovative technologies which require a change in emphasis in how diligence is managed. Eve highlighted the importance of establishing proprietary and licensing rights in technology businesses and the requirement of a holistic approach in assessing company value.

The panellists also provided their key predictions for FS, M&A and Fintech trends in 2021. Eversheds Sutherland’s Paul Pugh predicted payment services continuing to grow and an increased emphasis by companies of customers being part of a “community”, with a focus on bespoke, speedy and digitised services. The panellists also flagged the increasing importance of environmental, social and corporate governance, the proposed Fintech policy initiatives in the US and bridging the financial gap between the 14 million UK workers with unstable incomes who have stable bills. The latter issue being of equal importance to Fintech companies, financial institutions and the UK government.

No one disagreed with Anuj that the best piece of technology for 2020 had been the mute button!