Financial Tech Vendors Attracting Private Equity Interest
Private equity firms will step up interest in financial technology vendors over the next 12 months, led by investment activity in the $50 to $250 million range, according to research released by TowerGroup.
Between 2005 and the end of the first quarter 2007, only 2.8% of all private equity acquisitions were in financial services technology, cumulatively valued at approximately $33 billion, says TowerGroup.
But new research has found that a “livelier courtship” is now underway, which is evidenced by the recent acquisition of First Data by Kohlberg Kravis Roberts (KKR). TowerGroup says that private equity firms are starting to see the fintech sector more favorably due to “stickier revenue models”, more spending by clients and a global business environment that demands innovation.
The next 12 months will see a large volume of private equity investment in fintech firms at the low end of the market - deals under $50 million - as well as in the $50 to $250 million range
The research also found that as long as the transaction is based on a mutual desire to develop the business - not on financial arbitrage - then any investment can improve products offered by a financial technology vendor, says TowerGroup. The full report can be obtained from TowerGroup (registration or subscription required.)
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