UK fintech investment in rude health despite Brexit

London remains an investment hotspot for fintech assets despite wider concerns surrounding Brexit, according to recent venture capital and M&A metrics.

Reports from Silicon Valley Bank (SVB) and corporate finance advisers Hampleton Partners are steadfast on technology opportunities, and specifically bullish about the UK.

While the long-term impacts of the decision to leave the EU are yet to be seen, said SVB, the period following last summer's referendum saw no significant drop in deal numbers. In fact, recent figures revealed UK tech firms received more venture capital investment than any other European country post-referendum. SVB pointed out that the bull-run in US equities showed no signs of slowing post-election, touching all-time highs even in the face of fiscal policy stumbles and geopolitical uncertainty.

In terms of deal count, London dwarfed other European cities in the first quarter of this year with 118 deals worth about €635.4m; Paris had 41 (€235.4m), Berlin 39 (€209.8m), Stockholm 16 (€239.8m) and Barcelona 11 (€29m).

According to Hampleton's Financial Technology M&A Overview 1H 2017, t he hunt for front-to-back office management solutions, particularly in payments and lending, will spur transactions. Blockchain companies will be highly sought after and robo-advisors will continue to interest buyers looking to protect their customer base. Other hot areas are unsurprisingly artificial intelligence and 'regtech'.

Targeted acquisitions of mature fintech businesses will continue to be in demand as buyers look for scale, as well as the opportunity to enhance or replace in-house legacy systems. In this regard, enterprise resource planning and front-to-back office management solutions remain a bright spot in the sector, said Hampleton's report.

Payments prospects continue to thrive, luring internet and technology majors such as Apple and Google and a buoyant ecosystem of younger payment services. Similarly, P2P lending continues to gain momentum, albeit with some legal trouble at LendingClub that led to the departure of its former CEO Renaud Laplanche. Meanwhile, deals on the smaller end of the spectrum will be boosted by the hunt for the next wave of conceptstage disruption. Blockchain implementation, in particular, is gaining ground as the space moves from being a nascent technology to a key area of focus, it said.

Jonathan Simnett, sector principal, Hampleton Partners, said: "Going forward, Hampleton believes that the fintech M&A marketplace will remain consistent, continuing to deliver attractive multiples for sellers. Despite wider concerns surrounding Brexit and other geopolitical issues, London will remain an investment hotspot for fintech assets with investment activity driven by the three forces of compliance, consolidation and disruption.

"The ability to meet compliance requirements will be a factor in most deals whilst mature fintech businesses, particularly ERP and front-to-back office management solutions, will be in demand as buyers consolidate, looking for scale, and to enhance or replace in-house legacy systems.

"Disruptive alternative payment and lending services will continue to thrive, attracting more interest from technology majors such as Apple and Google whilst AI and blockchain implementations will be in demand as the technologies move to being a key area of focus in financial services."