Impact of COVID-19 on M&A activity in the fintech space

When COVID-19 forced us into lockdown I was asked for a comment on the outlook for funding for fintech and I could be forgiven for claiming my view at the time has been proven – that fintech funding or acquisition interest would all but stop for all but the highest quality opportunities.

I feel somewhat differently now and having lived through the COVID crisis for over five months, it is a good opportunity to reassess.

At the time I contended for any professional investor or those with a mandate to execute an inorganic growth strategy, writing an investment cheque or agreeing to a sales and purchase agreement (SPA) represents a good day in the office. So, it would not be for the want of trying that investment activity could slow down.

Deals are moving through the funnel again, and transactions are being concluded.

However, the practical realities of getting deals done is very different. At the highest level, getting to the point at which cash (or other securities) changes hands requires a four step process: i) engage with a company and build a relationship with the management team, ii) agree a three-to-five year business plan, iii) ascribe a value to said business plan, and iv) conduct a due diligence exercise and complete customary closing mechanics.

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