Fintech
PRIVATE EQUITY REACHED NEW HEIGHTS IN 2021 AS AVERAGE DEAL SIZE PUSHED PAST THE $1 BILLION MARK FOR THE FIRST-TIME EVER
Private equity set a remarkable new standard for itself in 2021. Buyout deal value reached an all-time high of $1.1 trillion, doubling 2020’s total of $577 billion and shattering the previous record of $804 billion set in 2006 during the exuberant run-up to the global financial crisis. Deal size, not deal count, was behind this increase. The number of deals greater than $1 billion roughly doubled in 2021, with average deal size reaching $1.1 billion, increasing 57% to pierce through the $1 billion mark for the first time.
One reason for the sharp increase in deal value last year is the sheer volume of capital in the market. After 10 years of steady growth, dry powder set yet another record in 2021, rising to $3.4 trillion globally, with approximately $1 trillion of that sitting in buyout funds.
The opportunity to put large amounts of capital to work produced a sudden and sharp increase in public-to-private (P2P) deals, especially in North America and the Asia-Pacific region. These take-private transactions soaked up $469 billion in capital globally, a 57% one-year increase, and were largely responsible for 2021’s record-setting value total. The last time the market produced such an increase in P2P transactions was in the run-up to the global financial crisis in 2006-07. The key differentiator of today’s P2P deals is their smaller size. Today’s P2P deals are often done by one to two buyers with deep expertise in the sector, versus the consortia of buyers required for the large deals we saw in 2006-07.
By deploying large amounts of capital quickly over the last three years, buyout firms have seen their share of M&A activity globally rise to 19%, its highest level since 2006. The push, however, has come at a cost: average buyout multiples in 2021 rose to 12.3x in North America, and 11.9x in Europe.
The increased level of pricing across the industry may also reflect the bet that more investors are making toward specialization, especially on technology-fueled growth. One in three buyouts now involves a technology company. Continued growth in sectors such as fintech, healthcare and business services—where outperformance is increasingly a function of technology expertise—means technology is now a key investment thesis in well over half of all deal activity.
In addition to investments, exits also roared to new records, with each and every exit channel about as attractive as it could be in 2021. Overall, buyout funds unloaded $957 billion in assets globally, more than doubling a strong 2020 total and beating the five-year average by 131%. Special-purpose acquisition company (SPAC) deals were particularly notable, increasing 325% from the year before and reaching $158 billion.
These are among the findings of Bain & Company’s 13th annual Global Private Equity Report, released today. Bain & Company is the world’s leading consulting advisor to private equity investors.
“Given the high prices paid in 2021, there will inevitably be an increase in pressure on deal sponsors to deliver results this year,” said Hugh MacArthur, global head of Bain & Company’s Private Equity practice. “The chances of success are highest for firms with a long track record in a sector. To drive returns during this high-wired time, it is critical that dealmakers fully understand the microeconomics of the sector, the value creation levers available to pull and the risks they’re under writing.”
Private equity continued to deliver for investors in 2021. Buyout funds, on average, have generated stronger pooled net IRR than public markets, offering broader exposure, less volatility and returns that are better over time. A full 95% of LPs surveyed by Preqin in Q4 2021 said that the performance of their PE portfolio met or exceeded their expectations in the past year, although some predict a bit of cooling in the coming year.
Fundraising rounded out the list of last year’s record-shattering metrics. Global funds raised across the full private capital spectrum hit $1.2 trillion, the highest level ever reached. Buyout funds raised $387 billion in 2021, their second-best year ever. Investor enthusiasm for private equity shows no signs of waning. Nearly 90% of LPs surveyed by Preqin in 2021 said that they expect to increase or maintain their PE allocations this year, and 95% said they will do so over the longer term.
“While the conflict in Ukraine removes one dimension of uncertainty around the global macro picture, it adds many new ones,” said MacArthur. “Ripple effects from the Ukraine conflict will be felt far and wide. The most obvious impact will be on oil & gas supplies, which now face both political and physical risks. Amid the chaos, investors will be challenged to gain conviction around a most-likely scenario. Rather, private equity investors and their portfolio companies will need to plan for a wider-than-normal range of scenarios and watch closely as events continue to unfold.”
This year’s Global Private Equity Report explores key themes to watch in 2022, including pressures on ESG (Environment Social and Governance) metrics, a shift toward dealmaking in Asia and the growing challenge of inflation.
Closing the ESG measurement gap
As more and more LPs and GPs seek ways to implement meaningful ESG strategies, they inevitably encounter a measurement gap that makes it difficult to gauge success. A lack of specific data standards and best practices related to ESG is hampering investors’ ability to consistently evaluate ESG performance across their PE portfolios. These challenges come through in a survey of LPs conducted jointly by Bain and the Institutional Limited Partners Association (ILPA). About 70% of LPs have made ESG a part of their investment policies. Of those, around 85% have a specific ESG policy related to private equity allocations, and those policies affect about 76% of their private equity assets under management. A full 93% said they would walk away from an investment if it posed an ESG concern.
Capturing software’s next wave of growth
Private equity investors closed $284 billion in tech deals in 2021, 90% of which were software deals. Investor appetite for B2B software and technology is only increasing as the performance of these investments speaks for itself. While fast-growing technology companies are typically associated with higher risk, the mature or maturing enterprise software companies private equity has gravitated toward have actually turned out to be less risky and volatile than other investments. Software has outperformed other private equity investments, with about 60% of deals returning 2.5 times or greater, and with fewer write-offs than other sectors.
PE’s inflation challenge
One new factor reared its head during 2021: inflation, which increased to levels not seen in the US and other markets in 40 years. However, as transitory this inflationary period may be, the reaction from the Federal Reserve and other central bankers will shape current and future dealmaking. One thing is for certain: There are now inflation playbooks developing across the GP and LP landscape as investors race to protect margins and future returns.
The report also examines the impact of the rising volume in growth equity assets under management, the increasing importance of sector specialization and best practices in technology due diligence.
As we close out 2024, the fintech industry continues to deliver headlines that underscore its dynamism and innovation. From IPO aspirations to groundbreaking regulatory milestones, today’s updates highlight the transformative power of fintech partnerships, regulatory evolution, and disruptive technologies. Here’s what you need to know.
Chime’s Quiet Step Toward Public Markets
Chime, the U.S.-based financial technology startup best known for its digital banking services, has taken a significant step by filing confidential paperwork for an initial public offering (IPO). As one of the most valuable private fintechs in the U.S., Chime’s move could potentially signal a renewed appetite for fintech IPOs in a market that has been cautious following fluctuating valuations across the tech sector.
With a valuation that reportedly exceeded $25 billion in its last funding round, Chime’s IPO could set a new benchmark for the industry. Observers note that its strong customer base and revenue growth may make it an appealing choice for investors seeking to capitalize on the digital banking boom. However, the timing and success of the IPO will depend on broader market conditions and the regulatory landscape.
Source: Bloomberg
ZBD’s Pioneering Achievement: EU MiCA License Approval
ZBD, a fintech company specializing in Bitcoin Lightning network solutions, has made history by becoming the first to secure an EU MiCA (Markets in Crypto-Assets Regulation) license. This landmark approval by the Dutch regulator positions ZBD at the forefront of compliant crypto-fintech operations in Europe.
MiCA, which aims to harmonize the regulatory framework for crypto-assets across the EU, has been a focal point for industry players aiming to establish legitimacy and expand their offerings. ZBD’s achievement not only validates its operational rigor but also sets a precedent for other fintech firms navigating the evolving regulatory landscape.
Industry insiders view this as a strategic advantage for ZBD as it broadens its footprint in Europe. By leveraging its regulatory approval, the company can accelerate its product deployment and establish trust with institutional and retail users alike.
Source: Coindesk, PR Newswire
The Fintech-Credit Union Synergy: A Blueprint for Innovation
The convergence of fintechs and credit unions continues to reshape the financial services ecosystem. Collaborative initiatives, such as the one highlighted in the recent partnership between fintech innovators and credit unions, are proving to be a potent force in delivering tailored financial solutions.
This “dream team” approach allows credit unions to leverage fintech’s technological expertise while maintaining their community-focused ethos. Key areas of collaboration include digital payments, personalized financial management tools, and enhanced loan processing capabilities. These partnerships not only enhance member engagement but also enable credit unions to remain competitive in an increasingly digital-first financial environment.
Industry analysts emphasize that such collaborations underscore a broader trend of traditional financial institutions embracing fintech-driven solutions to bridge service gaps and foster innovation.
Source: PYMNTS
Tackling Student Loan Debt: A Fintech’s Mission
Student loan debt remains a pressing issue for millions of Americans, and a Rochester-based fintech aims to offer relief through its cloud-based platform. This innovative solution is designed to simplify loan management and provide borrowers with actionable insights to reduce their debt burden.
The platform’s features include repayment optimization tools, personalized financial education, and seamless integration with loan servicers. By addressing the complexities of student loan management, this fintech is empowering borrowers to make informed decisions and achieve financial stability.
As the student loan crisis continues to evolve, solutions like this highlight the critical role fintech can play in addressing systemic financial challenges while fostering financial literacy and inclusion.
Source: RBJ
Industry Implications and Takeaways
Today’s updates underscore several key themes shaping the fintech landscape:
- Regulatory Milestones: ZBD’s MiCA license approval exemplifies the importance of regulatory compliance in unlocking growth opportunities.
- Strategic Partnerships: The collaboration between fintechs and credit unions demonstrates the value of combining technological innovation with traditional financial models to drive customer-centric solutions.
- Market Opportunities: Chime’s IPO move reflects a potential revival in fintech public offerings, signaling confidence in the sector’s long-term prospects.
- Social Impact: Fintech’s ability to tackle systemic issues, such as student loan debt, showcases its role as a force for positive change.
The post Fintech Pulse: Your Daily Industry Brief (Chime, ZBD, MiCA) appeared first on News, Events, Advertising Options.
Leading global payments platform SPAYZ.io has confirmed it will be attending iFX EXPO Dubai 2025 on 14 to 16 January. Exhibiting at Stand 64 at Trade Centre Dubai, SPAYZ.io’s team of professionals will be on hand providing live demonstrations of its renowned payment services for payment providers. Attendees will also receive exclusive insight into SPAYZ.io’s plans for 2025 alongside early early access to its upcoming plans for the new year.
SPAYZ.io delivers a host of payment solutions that leverage the latest technological innovations and open access to the fastest growing emerging markets across Africa, Europe and Asia. Over the past year, there has been huge demand for its Open Banking and local payment method services, alongside bank transfers, mass payouts, online banking and e-wallets.
Yana Thakurta, Head of Business Development at SPAYZ.io commented: “We look forward to once again participating at iFX Dubai to expand our network of partners and clients. It’s a fantastic way to kick off the year, connecting with thousands of industry leaders from FOREX platforms to trading companies, and everything in between.
“Our key goal for iFX Dubai EXPO 2025 is to expand our portfolio of solutions and geographies. We’re using this as an opportunity to partner with like-minded entities who share our ambition to provide payment solutions that are truly global.”
Come meet SPAYZ.io’s team at the Trade Centre Dubai at Stand 64. You can also book a meeting slot with a member of a team.
The post SPAYZ.io prepares for iFX EXPO Dubai 2025 appeared first on News, Events, Advertising Options.
Airtm, the most connected digital dollar account in the world, is proud to announce the addition of two distinguished industry leaders to its Board of Directors: Rafael de la Vega, Global SVP of Partnerships at Auctane, and Shivani Siroya, CEO & Founder of Tala. These appointments reflect Airtm’s commitment to innovation and financial inclusion as the company enters its next phase of growth.
“We are thrilled to welcome Rafael and Shivani to Airtm’s Board of Directors,” said Ruben Galindo Steckel, Co-founder and CEO of Airtm. “Their unique perspectives and proven track records will be invaluable as we continue scaling our platform to empower individuals and businesses in emerging markets. Together, we’ll push the boundaries of financial inclusion and innovation to create a more connected and equitable global economy. Rafael and Shivani bring a wealth of experience and strategic insight that will strengthen Airtm’s mission to connect emerging economies with the global market.”
Rafael de la Vega, a seasoned leader in fintech global partnerships and technology innovation, is currently the Global SVP of Partnerships at Auctane. With a proven track record of delivering scalable, impactful solutions at the intersection of fintech, innovation, and commerce, Rafael’s expertise will be pivotal as Airtm continues to grow. “Airtm has built a platform that breaks down barriers and opens up opportunities for people in emerging economies to connect to global markets. I am excited to contribute to its growth and help further its mission of fostering financial inclusion on a global scale,” said Rafael.
Shivani Siroya, CEO and Founder of Tala, is a pioneer in financial technology, renowned for empowering underserved communities through access to credit and essential financial tools. Her leadership in leveraging data-driven innovation aligns seamlessly with Airtm’s vision of creating more equitable financial opportunities. “Empowering underserved communities has always been at the core of my work, and Airtm’s mission resonates deeply with me. I’m thrilled to join the Board and work alongside such a dynamic team to expand access to financial tools that truly make a difference in people’s lives,” said Shivani.
The post Airtm Enhances Its Board of Directors with Two Strategic Appointments appeared first on News, Events, Advertising Options.
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