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Resilient Fintech Market Shrugs off Covid-19

The wave of digital transformation triggered by Covid-19 is washing over traditional finance, motivating slow-moving firms to make new acquisitions while the pieces of the post-pandemic world are still falling into place.

Several acquisitions have been made in August by companies seizing the moment, including two billion-dollar software deals between private equity sellers and established strategic buyers.

In the largest acquisition in its two-decade history, New York Stock Exchange owner Intercontinental Exchange (ICE) is paying Thoma Bravo $11bn for cloud-based loan origination platform Ellie Mae, which digitally processes mortgage applications. The deal will move ICE deeper into home loan technology, supporting chief executive Jeffrey Sprecher’s ambition to build a “clearing house for the mortgage industry.”

Niche enterprise software specialist Roper has made its own record acquisition, snapping up SaaS Insurtech firm Vertafore from Vista and Bain Capital in an all-cash deal valued at approximately $3.5 billion. Vertafore provides agency management, compliance, workflow and data software for the property and casualty insurance industry, and is expected to continue automating and simplifying insurance distribution as an independent company under Roper.

Both Roper and ICE have built out businesses over the last decade by acquiring market-leading firms, and these two deals show their willingness to continue forging ahead with expansion plans, despite the pandemic. On the other side, the readiness of private equity sellers to transact also shows a steadfast faith in continuing strong fintech and software valuations.

This confidence is echoed elsewhere, with MasterCard picking up cloud data platform Finicity in June for nearly $1 billion, and Square acquiring peer-to-peer payment startup Verse.

As the effects of the pandemic become clearer, we could expect levels of confidence to continue rising, with the return of strong debt markets for robust businesses putting more big ticket deals in the pipeline, just like like those sealed in early 2020 before the pandemic struck. These included Visa’s landmark acquisition of Plaid for £5.3 billion, which has recently been approved by regulators, and Morgan Stanley’s purchase of E*Trade for $13 billion in February.

Acuity’s Software Practice have experienced this resilience and confidence first hand, having recently advised Growth Capital Partners on their investment in financial services risk specialist CubeLogic

“Strategic acquisitions of software capability and digital providers across the global financial markets has been a continuing sector theme throughout 2019 and into 2020. We have been seeing the return of the software mega deal, in specific verticals, since July and expect this to continue throughout the rest of the year in subsectors such as collaboration, HRM, cyber, cloud and financial services.”

Richard Baker | Managing Partner and Software Practice Lead

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