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Fintech Companies - Private Equity Guide

02 March 2021

Original content provided by BDO

Eventful’ is a good one-word summation of 2020. For Fintech companies, it has been no different. Outside funding may be necessary to reach that potential. One possible investment avenue is private equity firms (PEs). On the PE side, there has been a steadily increasing interest in Fintech. But how can you identify the best prospective investors? Which PEs are best suited to take you to the next level - or to a favourable exit?

Receiving investment from - and being acquired outright by - PE investors can be great news for a Fintech company. PE firms are very focused on generating growth, as exemplified by analysis from BDO UK. A study of PE-backed companies showed that they on average increased revenue by 53% and staff by 43%.

Private equity firms are becoming more frequent investors in the Fintech space. 2019 saw $137.5 billion invested in Fintech, globally. Many investments and deals involve PE companies, including megadeals such as the $3.4 billion acquisition of Verifone. Deciding whether PE investment is the right fit for your company involves knowing how PEs can help you reach your goals.

However, PE can also be a risky path to additional capital. PE firms often have goals and focus points that differ from other investors – as well as potentially your own. One example is whether the PE fund plans to roll up your company and several other acquisitions into one entity. Knowing how to prepare for a potential PE acquisition, what PE firms are looking for, negotiating the optimal deal and collaborating with the PE firm post-investment are all crucial aspects.

BDO has developed the RETHINK framework to assist companies, including in the Fintech space, respond to the global pandemic. The framework helps businesses react to the immediate fallout of COVID, increase resilience and best position themselves to realise their full potential. These key aspects are also reflected in our studies and publications, which aim to provide companies with valuable information and contributions from experts with international experience and knowledge. This is also the case of this publication focused on the Fintech companies, which you have fully available in the attached link.

Many factors can affect your valuation, both positively and negatively. One of them is also how long you can keep operations going without injection of new capital. This guide seeks to answer such questions. Furthermore, the guide will cover the main steps along the way; from the first investment, considerations to post-acquisition collaboration and reaching potential earn-out targets.