Mercer Capital’s quarterly newsletter, FinTech Watch, provides an overview of the FinTech industry, including public market performance, valuation multiples for public FinTech companies, and articles of interest from around the web. This newsletter focuses on FinTech segments, including payment processors, technology, and solutions companies, examining general economic and industry trends as well as a summary of M&A and venture capital activity.
Mercer Capital's Value Focus: FinTech Industry | Third Quarter 2018
1. VALUE FOCUS
FinTech Industry
Third Quarter 2018
Broader markets in the third quarter of 2018 were relatively strong
with returns at ~8%. All three FinTech niches that we track out-
performed the S&P 500 by a relatively wide margin in the first
three quarters of 2018. The Payments, Solutions, and Technology
niches were up 37%, 26%, and 32%, respectively, in the first three
quarters of 2018 compared to 11% for the S&P 500. A portion of
this outperformance occurred in the third quarter of 2018 with the
niches up 9-15% compared to an 8% return for the S&P 500.
Additionally, the FinTech IPO drought that started in 2016 finally ended
with three new IPOs (EVO Payments, GreenSky, and i3 Verticals) in
the second quarter of 2018. Merger and acquisition activity declined
slightly in the first three quarters of 2018 (as measured by number of
deals), but there was a notable increase in larger deals with 14 trans-
actions having deal values greater than $500 million (compared to
only seven in the first half of 2017).
While interest in the FinTech sector remains high, the outlook remains
uncertain as competitive pressures, continuing technological change,
and regulatory/policy uncertainty remain. A strong 2017 and YTD
2018 in publicly traded FinTechs appears to have driven a pick-up in
larger exit/IPO FinTech activity. This reflects continued maturation
of the sector and could bode well for venture and growth funding
trends for the remainder of 2018 and 2019 as gains harvested by
investors can be redeployed in more early stage and high growth
private FinTech companies.
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