Signals 2.2 (Q2 2021)

Hi Fintech Friends,

Welcome to the second Signals of the quarter!

Our first issue of Signals covered the fundraises from Q2 2021, which as you can see, was pretty notable:

If you missed it, you can read the first issue here.

For new readers, Signals is the subscriber-only feature where we consolidate the fintech events of the last quarter in order to better understand the trendlines, not just the headlines.

Signals is broken down into 4 sections:

If you believe that fintech is only 1% finished, understanding these trends is critical to developing a perspective on where the other 99% will come from.

Best,

Nik

Fintech dealmaking took off in Q2.

While fintech venture capital experienced meteoric growth over the past quarter, the market for mergers, acquisitions, SPACs, and other exits was no less busy:

Fintech and financial services dealmakers completed 127 deals in Q2, representing $161 billion of disclosed deal volume (a 228% jump over Q1’s $49 billion). Many, many more IPOs were announced. Some (like Wise’s) already took place in Q3. Some, like Kakao Pay’s are still yet to come.

It’s not just fintech: 2021 feels like a frenetic year for private transactions and exit events across the board. Volumes and prices are up universally throughout tech. In fintech, coupled with a busy early-stage investing ecosystem, the uptick feels especially pronounced.

This wasn’t a US-specific phenomenon; fintech and financial services companies exited in about every geography we track:

Unlike prior quarters, in which M&A was dominated by stakes from strategic investors and acquirers, many private equity players got into the action in Q2. EMH Partners, Crestview Partners, Astorg, Ares, Bridgepoint, Thoma Bravo, and Silver Lake all made majority investments or purchases of fintech and financial services providers.

The full data on Q1 2021 fintech M&A activity are available here.

Payments was the dominant category in number of transactions, with 25 deals done (Lending deals came in second with 11 and Bank deals with 10 transactions).

However, there wasn’t a direct relationship between number of deals and value: the juggernaut in the room (Digital Assets) was represented by Coinbase’s $87 billion IPO. Card Issuance was the second largest category by valuation, led by Marqeta’s $14 billion IPO, Nuvei’s acquisition of Simplex, and SaltPay’s joint acquisition of Tutuka and Paymentology. The third place category was Payments (#1 by number of deals), with $13.6 billion in volume.

The largest 10 transactions by size in Q2 are shown below:

Interestingly, whereas financial services M&A and IPO activity dominated the largest disclosed deal sizes in Q1 2021 (below), Q2 represented the definitive arrival of large fintech exits. It’s incredible to see that the largest 11 deals were all fintech companies. (In Q1, only one top 10 deal came from a fintech company - Affirm’s IPO.)

The number of IPOs in Q2 (11) almost doubled from Q1 (6) as well. In Q2, Coinbase, Marqeta, dLocal, Bairong, Paymentus, Alkami, Flywire, Allfunds, Angel Oak Mortgage, Five Star Bancorp, and Insig AI all went public - with the 7 largest IPOs coming from fintech companies and the 4 remaining representing financial services.

There were also four SPACs - Serendipity Capital Acquisition, Portage Fintech Acquisition SPAC, Galata Acquisition Corp, and Fintech Ecosystem Development - formed specifically to target fintech acquisitions. Companies like Dave, Better, and CompoSecure meanwhile went public through SPAC vehicles.