The fintech M&A waiting game
Many fintech companies have emphasized their ability and willingness to make acquisitions amid the market's downturn.
Why it matters: The question being asked is how much they're willing to pay, and when they will act.
Driving the news: Several fintech companies at Goldman Sachs' Communacopia conference in San Francisco last week were asked the M&A question. Their answers were largely, "Yes, we're open to it. But ... "
Details: AvidXchange (valued at around $1.6 billion) recently acquired FastPay for an undisclosed price. CEO Michael Praeger said the company is still "as active as ever" in evaluating the M&A pipeline. But ...
- "Unfortunately, we've not seen the valuation adjustments that have happened in the public market kind of work their way through to the private market," he said, noting many private market founders and CEOs have not yet come to terms with the downturn. "My guess is that we're still early. "
- AvidXchange is looking for smaller acquisitions that can get the accounts payable software maker into new customer industries, typically companies that make less than $10 million in revenue, he said.
Lending company SoFi has not been shy about acquisitions in the past, snapping up Galileo and Technisys for over $1 billion each. But ...
- The company is pulling back from such massive acquisitions.
- "Unless something presents itself that's so game changing as the last two acquisitions ... we're going to keep our heads down to execute," said CEO Anthony Noto. "There are small things we could always do — less than $100 million — to improve our execution and our capabilities."
Meanwhile, Bill.com last year acquired spend management company Divvy for $2.5 billion. The company's CFO, John Rettig, says the it is still open to M&A. But ...
- The Divvy integration will remain the priority.
- "I think we are now positioned to evaluate additional opportunities as it relates to inorganic," he said. "But it'll all be along the lines of our existing product priorities and road map."
The bottom line: Many companies are still busy digesting highly priced acquisitions from recent years. Many are also waiting for private market valuations to go down. Meaning that some of the big acquirers through the pandemic days may not be the same as the ones to come.