SoFi diversifies product portfolio and expands customer base
In this quarter’s largest deal, US-based Social Finance (SoFi), Inc. signed a definitive agreement to acquire Galileo Financial Technologies for US$1.2b in cash and stock. SoFi grew quickly following the 2007-2009 financial crisis by refinancing student loans at cheaper rates, expanding over the last decade into investment and cash management. Galileo is a FinTech leader that runs an API-based enterprise payments platform used by companies such as Chime, Revolut, Transferwise, Monzo and Remitly. Its platform enables organizations to easily offer a range of financial services to consumers and businesses via mobile, desktop and a physical debit card.
The acquisition helps SoFi continue to grow. As lenders prepare for a potential rise in pandemic-related defaults, joining forces with Galileo allows SoFi to extend its products to Galileo clients and diversify into new offerings. Galileo and SoFi say they will work together to accelerate technology innovation as financial transactions continue to shift from physical only to a multichannel mix of digital and physical platforms.
Mastercard doubles down on open banking
Another major deal this quarter was Mastercard’s agreement to buy open banking company Finicity Corporation for approximately US$990m. This follows a similar acquisition by rival Visa earlier this year, which saw the card scheme buy data aggregator FinTech Plaid for US$5.3b. Both transactions underline the growing global open banking trend – and the strategic importance of this for card schemes.
Mastercard says the move will strengthen its push into the US open banking market, which follows a similar launch into Europe’s open banking in 2019. Over time, the payment giant expects linkages between regional strategies by leveraging expertise and technologies. Finicity’s existing agreements and API connections give Mastercard access to North America’s banking, lending and wealth management ecosystem, which supports the company’s overarching strategy to become a “one-stop partner” for banks, merchants and FinTechs. Beyond the strategic rationale to expand into the US, Mastercard is also keen to integrate Finicity’s account owner verification tools to speed up automated clearing house (ACH) and real-time payments.
COVID-19 prompts consolidation in hospitality and food and beverages sectors
This quarter also saw the announced acquisition of omnichannel provider 3C Payment by Irish-based payment provider Planet. 3C Payment has developed a universal, omnichannel payment platform that focuses on hotels and restaurants. The combination of the company’s gateway, integration and terminal capabilities, when combined with Planet’s value-added payment services, will create a unique platform in the payments sector, helping businesses improve the customer experience. The combined platform will manage more than US$51b each year from 800m transactions completed through nearly 600,000 merchants. The deal comes at a difficult time for travel and hospitality in general, with the OECD expecting at least a 60% decline in international tourism in 2020. Planet hopes the transaction will help it better support growth once demand returns.
Decrease in valuations
The median EBITDA multiple for all disclosed deals year-to-date decreased to 19.2x in YTD2020, from 21.8x in 2019. The median revenue multiple for the same period also decreased to 4.7x from 5.2x in 2019.