August 2017 Financial Technology MARKET UPDATE M&AMARLIN & ASSOCIATES INVESTMENT BANKING AND STRATEGIC ADVISORY TO THE FINANCIAL TECHNOLOGY AND INFORMATION SERVICES INDUSTRIES New York Washington, D.C. Toronto Financial Technology Financial www.MarlinLLC.com © Marlin & Associates Holdings LLC, All Right Reserved DEAR CLIENTS AND FRIENDS, B2B Fintech Is Alive and Well – And Growing: Our August 2017 Fintech Market Update Dear Clients and Friends, The market is up, the market is down, and it doesn’t seem to matter right now; interest in the Fintech sector keeps marching on. Our report found below highlights some of the m&a trends and transactions in the seven segments of the Fintech world that we follow, and sometimes lead, and so far, it's all still pointing up. A recent report by KPMG indicated that in Q2 the global Fintech industry saw $8.4bn in transaction value as a result of around 290 deals - up from around 260 deals in Q1. We note that investments into, and purchase of, b2b Fintech firms are particularly in vogue. The $3.6bn buyout of Canada’s D+H by Vista Equity was not only the biggest deal of the quarter, it was also a reminder that Fintech is about a lot more than just payments and lending. The D+H deal notwithstanding, it is smaller deals where most of the action is – most Fintech transactions are well under $200mn. And while a few Asian firms continue to draw very high values, the cumulative value of Fintech deals in Europe doubled compared to the prior quarter to around $2bn. The sources of capital are many, including traditional VCs and PE firms. But it is interesting to note that about $2.5bn of Q2 investment came from corporates - as the disrupted continue to push back - buying or investing in those who would be the disruptors. For some, the focus is on buying or investing in companies that help improve the efficiency of back-office functions along with those that provide reg tech, insurance tech, capital markets tech, exchanges, enterprise data, analytics, cloud-based services and AI. (See our take on the AI phenomenon here.) All this is not to say that consumer-based Fintech is out of favor. There are still a bunch of Fintech Unicorns out there: Lending Club, Square, Credit Karma, SoFi, Kabbage, Funding Circle, Gusto (Zenpayroll), Klarna, Avant Credit, Prosper Transferwise, Mozido and more. 26 of them by some counts – more than half of which are in China. But with regulators weighing tougher rules on consumer-oriented firms, Powa going bust, Zenefits seeing a big drop in market cap, and some of the largest consumer based Fintech companies cutting back growth estimates – and in some cases, jobs - there does seem to be some increased interest in looking to b2b Fintech companies. You can see more about the trends and deals in Fintech m&a in the report found below. As you will see, values and volume in all seven sectors of the Fintech world that we follow – and sometimes lead, remain strong. Please see the most notable deals below: • Vantiv (NYSE:VNTV) agreed on terms to acquire Worldpay • Red Ventures (Fort Mill, SC) agreed to acquire Bankrate (LSE:WPG) for $9.8bn, implying an enterprise value of $11.5bn (NYSE:RATE) for $1.3bn, implying an enterprise value of $1.4bn and and valuing the company at an implied 7.9x 2016 net revenue valuing the company at an implied 3.1x LTM revenue and 15x LTM and 21.1x 2016 EBITDA, EBITDA, • Blackstone (NYSE:BX) and CVC Capital Partners offered to acquire • Betterment (New York, NY) raised $70mm in a round of funding led Paysafe (LSE:PAYS) for £2.9bn (~$3.7bn), implying an enterprise by existing investor Kinnevik, and including other existing investors value of $4.0bn and valuing the company at an implied 4.1x LTM Bessemer Venture Partners, Menlo Ventures, and Francisco Partners, revenue and 15.9x LTM EBITDA, • Ingenico Group (ENXTPA:ING) agreed to acquire Bambora for €1.5bn (~$1.7bn), valuing the company at an implied 7.4x 2016 revenue, Also, please standby for some interesting changes to our newsletters and emails over the coming weeks. We’re working hard on them. If you’re curious, you can take a look at some of the new changes, here. Please read more from our Fintech Market Update, below. Sincerely, Kenneth B. Marlin | Managing Partner Marlin & Associates | www.marlinllc.com Marlin & Associates is one of the most active firms advising buyers and sellers of U.S. and international middle-market firms that provide software, data, and related services. The firm is based in New York City, with offices in Washington, D.C., and Toronto, Canada. It has been the recipient of numerous awards including “Boutique Investment Bank of the Year,” “Middle-Market Investment Bank of the Year,” "Middle-Market Financing Agent of the Year – Equity," and “TMT Advisory Bank of the Year.” Marlin & Associates' team of professionals has advised over 200 information-technology transactions. AUGUST 2017 MARLIN & ASSOCIATES: FINTECH MARKET UPDATE Financial Technology is a complex industry that serves a wide range of customers, including retail, commercial, merchant and investment banks; asset managers; insurance companies; securities exchanges; corporations (treasurers and CFO’s); merchants (payments); and a host of other financial services industry participants, consumers and intermediaries who interface with these financial institutions. 3 Marlin & Associates 8 Events 9 Sector Comparison 10 Sector Analyses 10 Banking Software & Processors 11 Capital Markets Software & Services 12 Data & Analytics – Financial Services 13 Insurance Technology 14 Payment Technology 15 Securities Exchanges 16 Technology-Enabled Financial Institutions 17 Case Studies AUGUST 2017 MARLIN AND ASSOCIATES: WHO WE ARE OUR SENIOR TEAM BRINGS EXTENSIVE DEPTH, BREADTH AND INDUSTRY EXPERTISE TO OUR CLIENTS Founder and Managing Partner of M&A Chief Operating Officer of M&A • Twice named to II’s Tech 50 • 20+ years of M&A experience advising • Member Market Data Hall of Fame technology and PE firms, globally • MD Veronis Suhler Stevenson • VP Business Development at FactSet • CEO of Telesphere Corporation • M&A attorney of Skadden, Arps, Slate, • CEO of Telekurs (NA) Meagher and Flom • EVP Bridge Information systems • CFO of JCF Group • SVP at Dun & Bradstreet • MBA from Columbia Business School • BA from the University of California (Irvine) • J.D. from Fordham Law School • MBA from UCLA, post-MBA from New Ken Marlin • CFA Charterholder York University Jason Panzer • 18+ years of investment banking and • 20+ years of investment banking private equity experience experience • Named twice to Dealer’s Digest and • Experience working with both large recently M&A Advisor’s “40-Under-40” corporations and entrepreneurial • Founded Marlin & Associates with Ken technology-based companies Marlin • Formerly at Robertson Stephens and • Formerly at Veronis Suhler Stevenson, PaineWebber (UBS) Morgan Stanley, and American • BS, Finance from Pennsylvania State International Group University • BS from Binghamton University Michael Maxworthy Paul Friday Paul Friday • 18+ years of M&A experience • VP of Business Development at SunGard • Founder of software company sold to SunGard • Started career designing trading software for TD Bank • BaSC, Engineering from University of Toronto Tom Selby "We would like to thank the Marlin & Associates team. They brought a deep understanding of the industry and their expertise was critical in helping us navigate through this strategic transaction. We are very excited about Advise’s future within this new structure.” Doug Schwenk, Founder and CEO of Advise Note: Not a complete list AUGUST 2017 OUR FOUNDING PARTNER HAS FOUR TIMES BEEN RECOGNIZED AS ONE OF THE MOST INFLUENTIAL PEOPLE IN FINANCIAL TECHNOLOGY “Deal making is as integral to the evolution of the financial technology industry as the technologies themselves and Ken Marlin has been in the thick of it...” – Institutional Investor 2014 . In 2011, Institutional Investor, the international publisher focused primarily on international finance, has named M&A’s Founding Partner, Ken Marlin, as one of Institutional Investor’s Tech 50, which honored the 50 most “disruptive” figures in the financial technology sector . Institutional Investor calls these 50 people disrupters because they're changing the way Wall Street does business . Ken was the only investment banker included on the list . In 2014, Institutional Investor again named Ken as one of the 50 most influential people in financial technology . Ken was, again, the only investment banker included on the list . In 2015 and 2016, Institutional Investor named Ken one of the “35 Most Powerful Dealmakers of 2016” . Institutional Investor calls these 35 people the influential financiers that accelerate financial start-up’s paths to commercialization Candidates were evaluated by four primary sets of attributes: achievements and contributions over the course of a career; scope and complexity of responsibilities; influence and leadership inside and outside the organization; and pure technological innovation. AUGUST 2017 PEER AND INDUSTRY GROUP RECOGNITION “We are always grateful to be recognized for our hard work, but we are more pleased that we are able to help our clients achieve the results that they seek.” Ken Marlin Founder and Managing Partner Boutique Investment Banking Firm of the Year (2014, 2015, 2016) - The M&A Advisor M&A Award USA TMT Advisory Firm of the Year (2012, 2015) – Acquisition International The M&A Advisor and The M&A Forum have recognized Marlin & Associates for excellence in multiple deal categories