M&A Predictions for 2021

M&A Predictions for 2021

Volker Schloenvoigt
January 31, 2021

It has become a bit of a tradition to dedicate one of the first M&A articles at the beginning of each year to explore specific areas that could, in our view, be subject to lots of M&A activity over the coming 12 months. But before we do so, it is worth having a brief look at how well we peeked into the crystal ball 12 months ago. At the time – and before COVID – we talked about three big trends that would drive M&A activity in payments: (1) cross-border mega-mergers, (2) acquisitions driven by payment schemes especially Visa and Mastercard, and (3) capability extension.

With hindsight and despite everything that the pandemic threw at societies as a whole, we were not that wrong when identifying those trends. Yes, there were not many mega-mergers last year, with Worldline/Ingenico being an exception, but there were numerous slightly smaller deals supporting geographical expansion (PayU into India, NETS into Poland, Stripe into Nigeria, Network International into Kenya, and others). The two biggest payment schemes, Visa and Mastercard, have also continued to flex their financial muscle – albeit at a slower pace – and continued to buy businesses that support a migration from card-centric payment technology to a wider payment technology proposition (e.g. Visa buying Yellow Pepper or Mastercard acquiring Finicity). Let’s not mention Plaid at this point, although it will be interesting to see whether there will be a different view now from global regulators when assessing anti-competitiveness on those deals. And finally, we have seen capability extension with Apple’s acquisition of softPOS provider mobeewave, one of the more intriguing deals of last year.So if our crystal ball was not that wrong last year, let’s hope for similar success with our predictions for 2021. Here are three of our trends:

  • B2B: In terms of transaction volumes and values, B2B dwarfs B2C and there is an increasing desire in the industry that some of the low-friction, seamless payment experiences are transferred into the B2B space as well. To date, most M&A activity in the B2B sector was linked to the travel industry and virtual cards (think eNett and WEX) but there is now so much more happening. There are many fintech players that have developed propositions targeted for example at SMEs, whether these are lending or cash flow optimisation solutions, or general products that support the digitisation of payments in that sector. We expect B2B to become much more prominent in people’s views when looking at payments.
  • Global Payment Integration: Admittedly this can mean a lot of different things to different people so let’s define what we mean by that. What we mean are companies that have payment technology that is not ‘restricted’ to one payment method whether these are cards (e.g. a card processor) or ACH payments but can do both and have technology that is agnostic and in support of all relevant payment types. With all the developments around real-time transfers and instant payments, there will be an increasing need to serve what corporates and merchants require. In a B2C environment today, cards are dominant but ACH payments will become much more relevant in B2C as well. Companies that can provide the infrastructure at a global level to meet those needs will be of interest. In this context, it was interesting to read last week that ACI has reportedly commissioned Goldman Sachs to look at strategic options for the business.
  • Finally, and very specifically, Buy Now Pay Later (BNPL): There is a general belief that lending solutions (including to SMEs) will become even more relevant but one only has to look at dozens of recent announcements of capital raises, acquisitions, planned IPOs or players in the space to recognise that BNPL providers have generated much hype around their solutions. It is a data-driven solution and there are so many players in this space that consolidation is almost a given or necessity. Geographical expansion is also beneficial as it creates further scale. Once some of the concerns by regulators around messaging and transparency of BNPL services have been addressed, BNPL is likely to stay as it provides value to both merchants and consumers.

As always, this year will continue to provide us with plenty of deals and material to comment on and we look forward to providing our reviews of some of the most attractive and interesting deals in the payment space.

The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).

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