Recently I have participated in a case study competition to acquire a mid-size financial technology firm. We were given a budget of $1.5 billion for a 5:1 leverage, given the company has positive reoccurring cash flow, growing operations, and seize greater market shares. The following will show the research we have done and the 3 candidates we have chosen for the acquisition.
Additional Requirements:
§ EBITA < $200MM
§ Private Company (Global or Local)
§ Positive Banking Penetration Index
§ Accepted Loan to GDP Ratio (World: 64%)
Background Information & Trends:
Technology has played an important role in the financial services industry over the past decade. A number of new and key trends are emerging that allowed many FinTech companies to expand and collaborate with various financial institutions and retail companies.
§ Consumer Demand for Mobile Commerce (Mobility)
o Rising expectations and new innovations emerges to advance mobile banking in the financial services and retail industry
o Anywhere, anytime computing: markets, apps, payments
o Ex: Smart Phones, Google Glass, Smart Watches
§ Social Networks
o The power of crowd online communities
o Enable opportunities for peer-to-peer lending, improve quality and depth of data used to identify credit risk
§ Improve Access to Capital (Security)
o Digital payments networks allows smooth transition of funds, single-click purchasing, real time payments
§ Leveraging Big Data for Better Risk Management (Big Data)
o Toll for credit evaluations, account monitoring, risk management
o Unlock access to new sources of available capital and wider field of qualified borrowers with increased accuracy
Issues:
§ New FinTech innovations failed to integrate available technology
§ Disrupt current process (Ex. Paper based transactions)
§ Inaccessible data
§ High acquisition cost
o Pass high cost to consumers and keep entrepreneurs from using those technologies
§ Risk model unsuited
Target Analysis:
Clear2Pay
Based in Diegam, Belgium
2012 Revenue: $116 MM
Belgium Loan-GDP Ratio: Belgium 99.8%(World Avg 64%)
•International technology provider of payment services for financial institutions
•Contactless Cards and Open Payment Framework
•Process payments through a centralized payments engine that utilizes a library of re-usable business services across all payment types
BRQ
Based in Sao Paulo, Brazil
2012 Revenue: $215 MM
Brazil Loan-GDP Ratio: 65.1%(World Avg 64%)
•National and international presence
•30% growth in recent year, $435 MM revenue in 2012
•Application outsourcing, service desk, custom application development, mobility solution, cloud computing, IT and Financial Processes Consulting
•Client based ranges from finance, insurance, energy, telecom, and retail companies
ARGO
Based in Richardson, Texas
2012 Revenue: $106 MM
United States Loan-GDP Ratio: 101.6%(World Avg 64%)
•Financial services and healthcare industries
•Partner with 8/10 US’s top 10 financial institution
•Specialize in lending, sales & services, teller payments
•Real time networking and database system integrations
•Analytics solutions for forecasting, fraud detection, and research
•Offices all across United States
Additional Requirements:
§ EBITA < $200MM
§ Private Company (Global or Local)
§ Positive Banking Penetration Index
§ Accepted Loan to GDP Ratio (World: 64%)
Background Information & Trends:
Technology has played an important role in the financial services industry over the past decade. A number of new and key trends are emerging that allowed many FinTech companies to expand and collaborate with various financial institutions and retail companies.
§ Consumer Demand for Mobile Commerce (Mobility)
o Rising expectations and new innovations emerges to advance mobile banking in the financial services and retail industry
o Anywhere, anytime computing: markets, apps, payments
o Ex: Smart Phones, Google Glass, Smart Watches
§ Social Networks
o The power of crowd online communities
o Enable opportunities for peer-to-peer lending, improve quality and depth of data used to identify credit risk
§ Improve Access to Capital (Security)
o Digital payments networks allows smooth transition of funds, single-click purchasing, real time payments
§ Leveraging Big Data for Better Risk Management (Big Data)
o Toll for credit evaluations, account monitoring, risk management
o Unlock access to new sources of available capital and wider field of qualified borrowers with increased accuracy
Issues:
§ New FinTech innovations failed to integrate available technology
§ Disrupt current process (Ex. Paper based transactions)
§ Inaccessible data
§ High acquisition cost
o Pass high cost to consumers and keep entrepreneurs from using those technologies
§ Risk model unsuited
Target Analysis:
Clear2Pay
Based in Diegam, Belgium
2012 Revenue: $116 MM
Belgium Loan-GDP Ratio: Belgium 99.8%(World Avg 64%)
•International technology provider of payment services for financial institutions
•Contactless Cards and Open Payment Framework
•Process payments through a centralized payments engine that utilizes a library of re-usable business services across all payment types
BRQ
Based in Sao Paulo, Brazil
2012 Revenue: $215 MM
Brazil Loan-GDP Ratio: 65.1%(World Avg 64%)
•National and international presence
•30% growth in recent year, $435 MM revenue in 2012
•Application outsourcing, service desk, custom application development, mobility solution, cloud computing, IT and Financial Processes Consulting
•Client based ranges from finance, insurance, energy, telecom, and retail companies
ARGO
Based in Richardson, Texas
2012 Revenue: $106 MM
United States Loan-GDP Ratio: 101.6%(World Avg 64%)
•Financial services and healthcare industries
•Partner with 8/10 US’s top 10 financial institution
•Specialize in lending, sales & services, teller payments
•Real time networking and database system integrations
•Analytics solutions for forecasting, fraud detection, and research
•Offices all across United States