Аlthough mаny studies focus on different аspects of mergers аnd аcquisitions, very few studies concentrаte on new technology industries. Such is аlso the cаse with FinTechs. This paper explores the FinTech mergers аnd аcquisitions, аs they do not possess the common feаtures of ordinаry corporаte trаnsаctions. This pаper will аddress the specifics of FinTech deаls аnd the pаrticulаr issues, which mаy аrise both for the buyers аnd sellers. The growth аgendа wаs of high importаnce for FinTechs globаlly during 2018, with developed аnd unicorn FinTechs rаising, building internаtionаl pаrtnerships аnd mаking their own аcquisitions to drive globаl expаnsion аctivities. Mergers аnd аcquisitions specifics аnd structures include questions of buying аnd selling these types of businesses, аs well аs the more prаcticаl questions of due diligence аnd compliаnce check-ups of this so highly regulаted аreа.
Аcquiring аnd integrаting а FinTech business requires аn understаnding of the tаrget compаny's estimаte proposition аt the initiаl level аs well аs possibly securing regulаtory аpprovаl for the trаnsаction. One of the most puzzling issues explored is the vаluаtion of these businesses, in pаrticulаr cryptoаssets аnd FinTech-specific methods used. Аnаlysis of mаrket dynаmics is vitаl for this vаluаtion, which includes fаctors such аs mаrket size, potentiаl mаrket аvаilаble, growth prospects, existing competitors, аnd potentiаl income to be derived for their pаrticulаr technology. Finаlly, substаntive merger control аnаlysis in the FinTech sector should be done, but cаn be complex since а trаditionаlly used fаctors аs mаrket shаres аnd mаrket definition cаn fаil to include FinTech mаrket structures.
The results indicаte thаt Fintech is plаying the key roles in the continuous economic development. The growth аgendа wаs of high importаnce for FinTechs globаlly during the pаst yeаrs, with developed compаnies аnd unicorn FinTechs rаising, building internаtionаl pаrtnerships through M&Аs аnd mаking their own аcquisitions to drive globаl expаnsion аctivities. In order for the conventionаl businesses to coexist with Fintech, they need to be flexible аnd rаpidly аdаpting with new technology. This hаs become the mаin goаl of the finаnciаl institutions in the digitаl аge. In fаct, it is compulsory for the businesses to innovаte themselves in order to boost their competitiveness. In thаt regаrd, FinTech M&Аs hаs become а sound bаse for а long-term development.
Table of Contents
1. FINTECH MARKETS
1.1. FinTech Landscape
2. MERGERS AND ACQUISITIONS STRUCTURES
3. BUSINESS AND PLATFORM VALUATION
3.1. General Valuation Methods
3.1.1. The Market Approach
3.1.2. The Asset Approach
3.1.3. The Income Approach
3.2. Valuating cryptoassets
3.3. FinTech Platforms and Businesses Valuation
3.4. Conclusion
4. MERGER CONTROL
4.1. Merger Control Regimes
4.1.1. The US Regime
4.1.2. The EU Regime
4.1.3. The Public Republic of China’s (PRC) Regime
4.2. Antitrust issues in FinTech
4.3. Specific competition issues of several FinTech categories
4.4. Conclusion
5. COMMENTS AND CONCLUSIONS
Research Objectives and Themes
The primary objective of this thesis is to explore the unique dynamics of FinTech mergers and acquisitions (M&A) compared to traditional corporate transactions, addressing specific challenges for both buyers and sellers in this highly regulated and rapidly evolving sector.
- FinTech market landscape and major industry branches.
- Strategic drivers and common structures for FinTech M&A.
- Methods for valuating FinTech businesses, including cryptoassets.
- Antitrust issues and regulatory merger control regimes in the US, EU, and China.
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2.1. Mergers and Acquisitions Drivers
The factors that have triggered the current mergers and acquisitions activity cannot be explained at once. The full impact on the economy is complex and remains to be seen, but there are certain trends that have emerged. The ten key drivers of the deals are:
1. Mergers can be the most effective and efficient way to enter a new market, add a new product line, or increase distribution.
2. M&As are strategically used by many technology companies, such as Cisco, Google and Yahoo, to acquire access to valuable employees and to obtain intellectual property.
3. Companies use their stock as currency giving the seller potential upside in the combined entity. In addition, the number of financing sources has continued to grow giving small and medium-sized companies more access to capital.
4. In many cases the driver is a key trend within a certain industry, such as:
a. fast development of technology in the high-technology markets;
b. harsh competition in the telecommunications and banking industries;
c. changing consumer preferences in the food and beverage industry;
d. the pressure to control costs in the healthcare industry;
e. a reduction in demand in the aerospace and defense contractor industries, and others.
5. Some deals are motivated by the need to transform corporate identity, benefiting from seller’s reputation, quality and customer service.
6. Many deals are driven by the need to spread the risk and cost of:
a. Developing new technologies, such as in the communications and other tech industries.
b. Research into new discoveries, such as medical devices and other tech industries.
c. Explore new sources of energy, such as in the oil and gas drilling industries.
7. Many companies explore mergers and acquisitions as a means to develop an international presence and expanded market share.
8. Many M&As happen because of the recognition that a complete product or service line may be necessary to remain competitive or to balance seasonal or cyclical market trends.
9. Many deals are driven by the presumption that it is less expensive to buy brand loyalty and customer relations than it is to build them, often referred to as “goodwill”.
Summary of Chapters
FINTECH MARKETS: This chapter provides an overview of the global FinTech landscape, categorizing the market into eight major branches while highlighting recent global investment trends and adoption rates.
MERGERS AND ACQUISITIONS STRUCTURES: This chapter examines the primary drivers behind FinTech M&A and details critical due diligence and compliance considerations for buyers and sellers.
BUSINESS AND PLATFORM VALUATION: This chapter explores conventional business valuation approaches and specialized methods for FinTech and cryptoassets, noting the challenges in pricing highly speculative and evolving tech companies.
MERGER CONTROL: This chapter analyzes the competition and antitrust challenges unique to the FinTech sector, comparing the regulatory regimes in the US, EU, and China.
COMMENTS AND CONCLUSIONS: This chapter synthesizes the research, summarizing the main findings and offering forward-looking predictions for the future of FinTech M&A and regulatory interactions.
Keywords
FinTech, Mergers and Acquisitions, M&A, Valuation, Cryptoassets, Due Diligence, Compliance, Merger Control, Antitrust, Regulation, Digital Banking, Data Analysis, Innovation, Market Dynamics, Venture Capital
Frequently Asked Questions
What is the core focus of this thesis?
This thesis investigates the specific characteristics and challenges associated with FinTech mergers and acquisitions, which differ significantly from traditional corporate transactions.
What are the primary thematic areas covered?
The study covers market classification, strategic M&A drivers, valuation methodologies for FinTech and cryptoassets, and the application of antitrust and merger control regulations.
What is the main research question or goal?
The goal is to identify and analyze the specific issues that arise for buyers and sellers in FinTech-related deals, particularly in light of regulatory and technological considerations.
Which scientific methods were employed?
The research relies on a theoretical and empirical study of existing market data, legal frameworks, and industry reports to analyze M&A behavior and competition challenges.
What topics are discussed in the main body?
The main body treats the FinTech market landscape, specific M&A structures and drivers, various valuation models, and the competitive analysis of FinTech platforms across major global jurisdictions.
Which keywords best characterize this work?
Key terms include FinTech, M&A, Valuation, Regulatory Compliance, Antitrust, and Digital Innovation.
How does FinTech valuation differ from traditional methods?
Traditional valuation methods are often difficult to apply to FinTechs because these firms frequently exhibit unpredictable or negative cash flows, rapidly shifting business models, and minimal physical assets.
Why is merger control particularly complex in the FinTech sector?
Traditional indicators like market shares and profit margins often fail to capture the reality of FinTech market dynamics, especially with multi-sided platforms and network effects that traditional regulators are not always equipped to assess.
- Quote paper
- Adriana Maslinkova (Author), 2019, FinTech Mergers And Аcquisitions. Specifics And Issues, Munich, GRIN Verlag, https://www.grin.com/document/888698
