Fintech M&A rebounds from the pandemic
The wealthtech market is heating back up after COVID-19 put deal making on ice.
RightSize Solutions, a firm providing IT and cybersecurity services to RIA firms, has been acquired by Swizznet, a cloud-based software company. Terms of the deal were not disclosed.
Owned by private equity firm Bluff Point Associates, Swizznet’s expansion into wealth management (it is best known for working with accounting firms) continues the trend of PE dollars flowing into the independent advisory space.
The deal also reflects a rebound in fintech M&A activity. After only 166 deals in the second quarter of 2020 — the lowest since 2014 — the third quarter saw 245 deals according to data published by FT Partners, an investment banking firm focusing exclusively on fintech. The cumulative value of the deals, $66.8 billion, was the third-highest ever, according to the firm.
There have been 665 fintech M&A transactions year-to-date in 2020, compared to 748 deals in the first three quarters of 2019, according to FT Partners The activity signifies a snapback to pre-pandemic levels, says Managing Director Greg Smith.
FT Partners attributes 129 of the 2020 YTD deals to the “wealth and capital markets” sector.
The largest acquisition so far has been Morgan Stanley’s $13 billion purchase of E-Trade, which accounts for two-thirds of the $19.6 billion spent on wealthtech M&A in 2020.
It’s not just M&A activity that has rebounded. Wealthtech companies drew $1.5 billion in funding across 62 deals in Q3, according to a separate report from research firm CB Insights. That’s a a five-times increase in quarterly funding compared to wealthtech’s recent low in the fourth quarter of 2019.
Investors see growing opportunities for fintech targeting older consumers, CB Insights researchers say. The early-stage startups that attracted funding in the quarter tended to focus on new ways to help manage retirement. For example, Retirable, which offers $99 financial plans to pre-retirees, attracted $4.7 million. Capitalize, a digital platform for rolling over 401(k) accounts, received $2 million.
Meanwhile, late-stage funding went to fintechs focusing on customized long-term investment planning, such as financial planning firm NextCapital getting a $30 million infusion.
Fintechs automating fraud protection and compliance are also gaining traction, CB Insights researchers say.