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Fintech M&A 2020 Deal Tracker: Worldline inks $8B megamerger

Financial technology M&A deal activity got a boost in February as French payments company Worldline SA agreed to buy its peer Ingenico Group SA for $8.51 billion. This is the largest European fintech M&A deal of the past 12 months, and it will create the fourth-largest payment services business in the world, according to the two companies.

Worldline made no secret of the fact that it was on the acquisition trail when Deputy CEO Marc-Henri Desportes spoke to S&P Global Market Intelligence on the sidelines of the Money2020 Europe conference in Amsterdam in June 2019. Fresh from the company's $2.89 billion purchase of Swiss-based SIX Payment Services in late 2018, Desportes hinted that Worldline had another big deal in the pipeline, and predicted that the European payments market was set for a wave of consolidation in the coming year.

This turned out to be correct, with the European market seeing several other deals over the $1 billion mark in the second half of 2019. These include Italian payment processor Nexi SpA's $1.11 billion acquisition of Italian bank Intesa Sanpaolo SpA and another deal by Worldline, the $1.19 billion purchase of Dutch payment processor equensWorldline SE.

In North America, Visa Inc.'s $4.90 billion acquisition of fintech startup Plaid Inc. in January caught the attention of the global fintech community, not least because of its large price tag.

S&P Global Market Intelligence research found that while Plaid may appear small compared to Visa's $440 billion enterprise value, in fintech startup terms, the deal is an unusually large one.

San Francisco-based Plaid, which is less than 10 years old, specializes in application programming interfaces, or APIs. APIs are a crucial are a a piece of technology in Open Banking, effectively acting as an information "middleman" between banks and third parties, such as fintechs.

Incumbent financial institutions are taking an increasing interest in APIs. Based on an analysis of earnings transcripts, APIs were barely mentioned in 2011, but were spoken about regularly from 2016 through 2019. Plaid is in prime position to capitalize on this growing interest, which goes some way to explaining the high price Visa paid for it, according to S&P Global Market Intelligence research.

Banks and other large financial institutions are realizing that they need to take steps to keep up with technology, and many are increasingly open to doing this via M&A rather than trying to develop their own solutions in-house, according to Jennifer DePalma, counsel at law firm King & Spalding.

"We see a continued willingness to look outside the organization for new technology," DePalma said in an interview.

Payments, specifically solutions for smaller businesses, are a segment that is especially ripe for M&A in 2020, she said.

Personal investment is another area to watch, with companies that help people invest "in a tech-focused way" likely to emerge as a potential M&A targets in the coming year, DePalma said.

The Worldline and Visa deals, while large, follow in the wake of a record-setting year for fintech M&A in 2019. In January of that year, Fiserv Inc. announced its $21.79 billion acquisition of First Data, and in February, a private investor group announced it was acquiring The Ultimate Software Group Inc. for $10.97 billion.

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