PitchBook released their Quarterly Fintech M&A Review, which is tracking big bank M&A activity.
PitchBook has shared informative and detailed insights on M&A by the 30 largest US banking institutions and by publicly traded fintech companies.
Key takeaways shared by PitchBook from the report:
- Corporate M&A begins to gain steam: Corporate acquisitions of B2B fintechs rose by an estimated 42% YoY in Q3 after several quarters of minimal growth. We believe we are in the early innings of a sustainable corporate M&A recovery. Recall that C-suite and board appetite to make acquisitions rises and falls with stock price, revenue growth, FOMO, and the confidence that comes from stableto-improving performance over time. Q3’s rebound was led by acquisitions from Stripe, Shift4 Payments, Pagaya, US Bank, and Paylocity.
- PE buyouts jump, and the rise appears sustainable: We believe we are observing a real recovery in PE fintech buyouts. Q3’s buyout count rose by an estimated 77% YoY after declining by 14% YoY in the prior four quarters. We see another sign of PE’s strength in Q3’s disclosed platform deal value, which rose to $13.8 billion compared with an average of $7.7 billion in the prior four quarters and an average of $3.9 billion per quarter from 2019 to 2024. Lower rates and a
robust economy are helping, but large corporate M&A and PE-backed IPOs will likely need to pick up for buyouts to materially accelerate. - Acquisitions by public fintechs remain slow: Acquisitions by the 46 publicly traded fintechs we track reached an estimated 33 transactions in 2024 compared with 34 in 2023 and 62, on average, from 2018 to 2022. Estimated 2024 deal value is tracking similarly. The decline has been driven by drop-offs from Stone Pagamentos, WeWork, PayPal, and several deSPACs. In other words, 2021’s froth has subsequently normalized. Acquirers that remain active include Visa, Mastercard, Shift4, Corpay, WEX, Nuvei, and others.
- New federal regulatory posture is unlikely to materially accelerate corporate fintech deals: We believe that large public fintechs such as Visa and Mastercard may be slightly more acquisitive, at best, under the new presidential administration. However, these organizations likely know that major acquisitions, such as Visa’s proposed acquisition of Plaid, can easily be challenged by the next Democratic administration. We expect a greater bump to Big Bank M&A.
- Big Bank M&A is at a low but should rebound: We estimate that 2024 will see 12 acquisitions by the 30 largest US banks compared to 10 in 2023 and 29, on average, from 2018 to 2022. Despite low deal count, Capital One’s proposed acquisition of Discover would propel 2024’s recorded deal value to $46 billion, a 10-year high. The most active big banks over the past two years include American Express, First Citizens Bank, BMO Bank, Fifth Third Bank, and J.P. Morgan.
- The new presidential administration should increase bank M&A: The Trump administration will likely have a lighter touch on banking M&A, ushering in a more lax approach from federal agencies. Regulators under any administration, Democratic or Republican, are still allergic to too-big-to-fail banks getting even bigger (unless there is a banking crisis), making it unlikely that megabanks will be allowed to acquire other large banks. However, banks with under $300 billion in assets could acquire competing firms in deals similar to the SunTrust and BB&T combination.
- Banks are also likely to acquire new technology assets to earn market share in their respective niches. Banking requires significant technology investment, which is best offset by spreading fixed costs across a larger customer base.