Despite the Recent Flurry of M&A Activity, Some Deals are Not Meant to Be

There is nothing unusual about M&A and financing round announcements in the fintech and payments world, but the level of activity just around the cusp of the year has certainly been eye-catching. Consider just a few examples...

... of M&A deals:

• Utimaco acquired MYHSM just weeks after both companies were featured in my report on payment HSM-as-a-Service.
• Fiserv agreed to acquire Ondot, digital card services platform.
• NCR made a $1.7bn offer for Cardtronics, ATM network and operator.
• Equifax announced acquiring Kount, the ID trust network.

... and of investment activity:

• Checkout.com tripled its valuation to $15 billion following a $450 million Series C funding round. It is now the fourth largest fintech business globally and the largest venture-backed business in EMEA.
• GoCardless nearly became a unicorn with a $95m Series F round and valuation of $970m.
• Rapyd secured $300 million in a Series D financing round, valuing the company at $2.5 billion.

It is clear that despite the economic headwinds, there is still plenty of funds for companies with the right business model, particularly in the booming online payments sector. Also, firms with strong balance sheets continue to have a keen eye on complementary assets that can help further their strategies.

However, perhaps the biggest announcement of recent days came yesterday with Visa and Plaid agreeing to terminate their merger. The $5.3 billion takeover was originally announced exactly a year ago on January 13, 2020. However, in November last year, the US Department of Justice brought a legal challenge on antitrust grounds. Rather than fighting the lawsuit, the companies agreed to retreat.

In the investor call yesterday afternoon, Visa executives said they were “confident they would have prevailed in the litigation", as the assets were "complementary, not competitive”. However, faced with “protracted and complex litigation”, they thought their time would be better spent focusing on implementing a broader strategy, which encompasses three growth paths in consumer payments, new flows, and value-added services.

Partnerships with a broad range of fintechs to help facilitate payment and money movement experiences will continue to play a key role for Visa, as it implements its “network of networks” strategy. The executives also reiterated their emphasis on “service layers rather than core infrastructure”, citing recent acquisitions of Bell ID, Cardinal Commerce, and Yellow Pepper as examples of capabilities enabling value-added services (e.g. tokenisation, authentication) that Visa can offer, irrespective of the underlying network.

Plaid's CEO also agreed in his blog that "the pace of a multi-year regulatory review is not compatible with the fast-moving realities of a startup – and delaying close another year or more is not in the best interest of our customers, the financial system, or consumers themselves." According to the company, Plaid "was in a strong position a year ago, and the merger was one of many paths the company could have taken. We are in an even stronger position today. While an exciting option at the time, given recent developments we are going to head in a new direction as an independent entity."

Visa was an early investor in Plaid, and the two companies expect to continue their relationship as partners. Having said that, there may now be other firms interested in Plaid’s capabilities. They’ll just need to be careful that the regulators don't scupper their plans as well. Certainly, the last thing anyone wants is for investors in fintechs to get cold feet about their potential exit plans.