2022_Fintech M&A Insights

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12 PREPARING FOR THE FINTECH CONSOLIDATION WAVE: 10 THINGS TO CONSIDER Consolidation will be an important foundation for the continued digital transformation of the financial services industry. The FinTech sector is maturing in profound ways, and the search for greater scale and diversification will be a critical driver for firms in the near term. Consolidation will take various forms, from traditional M&A to strategic partnerships and investments. While transactions will vary in ways that are reflective of the diversity of the FinTech sector itself, here are 10 things that should be considered. The investment in or acquisition of a FinTech business may take a number of different forms, but in all cases there will need to be thoughtful consideration on how a transaction is structured. Will it be in the form of a minority investment or full acquisition? Will the business be integrated into the buyer's business or operated on a standalone basis? Are any parties sensitive to "control" issues under specific legal and regulatory regimes? Answers to these questions will drive a number of other important issues, including the appropriate due diligence strategy, the negotiation of certain representations and warranties, and other contractual provisions. Another chief concern is the future plans for the business and its integration. For an established FinTech buyer, there may be a desire to integrate the business into its own to maximize synergies. For a bank- affiliated buyer or investor, plans will vary depending on the nature of the transaction and the need to integrate the target into its existing compliance infrastructure. Other buyers and investors, particularly from private equity or venture capital, may prioritize retaining management and ensuring the target's innovation- focused culture is maintained to maximize growth and increase the prospect for a successful exit. Giving priority to structuring and integration-related issues at the onset will help acquirers and investors to avoid transaction pitfalls. STRUCTURING ISSUES AND FUTURE PLANS FOR THE BUSINESS ARE CRUCIALLY IMPORTANT

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