Global FinTech funding totals $8.2bn in Q3 2017, reveals new report

BY Fraser Tennant

Investment in FinTech reached $8.2bn across 274 deals in Q3 2017, with venture capital (VC) funding strong and deals large, according to KPMG’s latest quarterly analysis of global trends.

In ‘Pulse of Fintech Q3 2017’, KPMG reveals that the US led global FinTech investment in Q3 2017, with $5bn deployed across 142 deals (VC funding increased to $3.3bn across 211 deals, up from $3.01bn in Q2). In Europe, FinTech deals accounted for $1.66bn of investment across 73 deals, while Asia saw $1.21bn invested across 41 deals (VC funding was particularly strong in Europe in Q3 at over $700m).

Additional Q3 2017 FinTech highlights include: (i) the median deal size for angel/seed stage deals at the end of Q3 2017 stood at $1.4m, up from $1m in 2016, while the median deal size for early stage rounds was also up to $5.5m from $5.1m in 2016; (ii) the median deal size of late stage deals was even year-over-year at $16m; (iii) while overall corporate VC funding has declined so far this year, the participation rate remains high (corporates have participated in 18 percent of all FinTech VC deals globally, year-to-date); and (iv) FinTech venture-backed exit activity skyrocketed in Q3 2017, almost tripling quarter-over-quarter from $270m to $940m. This reflects the second-best quarter on record for FinTech exits.

Furthermore, the top 10 global deals in Q3 2017 included six US companies. These were Intacct ($850m), CardConnect ($750m), Xactly ($564m), Merchants’ Choice Payments solutions ($470m), Access Point Financial ($350m) and Service Finance Company ($304m). The remaining four were Germany-based Concardis ($806m), UK-based Prodigy Finance ($240m), Canada-based TIO Networks ($238.9m) and China-based Dianrong ($220m).

“The level of corporate participation in FinTech VC investment deals in Europe can largely be attributed to a growing recognition by traditional financial institutions that digital transformation is critical,” said Anna Scally, a partner, head of technology and media and FinTech lead at KPMG. “Build or buy is always an important consideration. Many of these financial institutions have started to heavily invest in FinTech companies as a strategy to give them the direct access to the new technologies they need to compete."

Looking ahead, the KPMG report notes that the FinTech sector is expected to continue to evolve rapidly, with many companies, including both mature FinTechs and large e-commerce players, looking to diversify into adjacent services.

Report: Pulse of Fintech Q3 2017 - Global analysis of investment in fintech

GIP makes $5bn renewables bet on Equis

BY Richard Summerfield

US investment fund Global Infrastructure Partners (GIP) and a number of partners, including Canada's Public Sector Pension Investment Board and the Chinese sovereign fund China Investment Corp, have agreed to acquire Equis Energy in a $5bn deal, including $1.3bn in debt. The deal is expected to close in the first quarter of 2018.

Equis is the largest renewable energy independent power producer operator in the Asia‐Pacific region, with over 180 assets in operation, construction and development across Australia, Japan, India, Indonesia, the Philippines and Thailand with a capacity in excess of 11 gigawatts.

The deal is the largest ever transaction in the renewable energy space, an industry which has begun to see increased activity in recent years. As governments, particularly in Asia, continue to seek out alternatives to fossil fuels to meet rising energy demand and combat pollution, the renewables industry will likely see increased dealmaking activity.

David Russell, chief executive of Equis and chairman of Equis Energy, said: “The investment by GIP and its partners is exciting news for the development of renewable energy in the Asia‐Pacific. GIP has a strong track record of managing and growing utility‐scale infrastructure businesses, and the combination of experience and knowledge across GIP and the existing management team will allow Equis Energy to continue expanding competitively across its target markets.”

Adebayo Ogunlesi, chairman and managing partner of GIP, said: “We are excited by the new investment in Equis Energy, which is a strong fit with GIP’s global renewable investment strategy. Equis Energy is a unique success story in the APAC region as it has systematically executed its growth strategy since its founding 5 years ago. In that period, Equis Energy has become one of the leading renewable energy platforms in the region, with a best‐in‐class business model, a high‐ quality asset portfolio and an outstanding management team. We look forward to continuing the Equis Energy success story in the years to come and to supporting new growth opportunities in one of the most promising renewable energy markets in the world.”

There was reportedly considerable interest in Equis. GIP and partners are believed to have beaten a number of rivals, including global pension funds and several buyout firms, in order to acquire the company.

News: U.S. fund, CIC snap up Equis Energy for $3.7 billion in bet on renewables

Global consulting sector M&A rises 1 percent in Q3 2017, reveals new report

BY Fraser Tennant

Mergers & acquisitions (M&A) activity in the global consulting sector in Q3 2017 rose 1 percent year-on-year (YoY), with large variations across market segments, according to a new report by Equiteq.

In ‘Q3 2017 Marketing Update – The Global Consulting M&A Report’, Equiteq notes that the media & marketing and management consulting segments experienced the strongest M&A activity during the quarter.  Elsewhere, despite notable deals occurring in human resources and IT services, deal activity fell in these segments. In engineering consulting, deal activity rose strongly in comparison with the previous quarter.

Among the report’s key findings: (i) there were 609 M&A deals in total in the consulting sector in Q3 2017; (ii) North America saw strong deal flow, with 288 deals (up 7 percent (YoY) and with a median deal size of $20m); (iii) Europe saw 228 deals (flat YoY and a median deal size of $7.5m); (iv) Asia-Pacific and Australia saw 63 deals (down 21 percent YoY and a median deal size of $3.5m). Furthermore, despite continuing tensions between the US and parts of Asia, cross-border deal flow fell only slightly compared to Q2 2017.

“We are seeing strong and accelerating activity across our global platform in North America, Europe and Asia,” said David Jorgenson, chief executive of Equiteq. “Current market conditions are favorable for owners of knowledge-led businesses who are investigating their strategic and liquidity opportunities.”

In addition, the report found that private equity activity continues to remain strong despite fierce competition and strong pricing from cash rich strategic buyers. Notable financial buyer investments in Q3 2017 included Apax Partners’ acquisition of ThoughtWorks and Vista Equity Partners’ acquisition of The Advisory Board Company’s education business.

The Boston Consulting Group’s acquisition of digital design and innovation consulting lab MAYA represented another high-profile example of a move by a leading management consulting firm to capitalise on the huge opportunity for providing advisory services around digital transformation initiatives. In terms of technology M&A, global professional services company Accenture continued to be the most acquisitive buyer, acquiring seven businesses, with notable deals in spaces like communications strategy, creative media, asset management consulting, agile software-development, cloud-based mobile, and big data and analytics.

Mr Jorgenson concluded: “We are experiencing strong deal flow across our global business, which has accelerated over the last two months. The current market conditions are favourable for sellers of sale ready consulting businesses.”

Report: Q3 2017 Marketing Update – The Global Consulting M&A Report

AI could add £630bn to UK economy, suggests new review

BY Fraser Tennant

An increase in the use of artificial intelligence (AI) could bring major social and economic benefits to the UK and add £630bn to the UK economy, according to a review published this week.

In ‘Growing the Artificial Intelligence Industry in the UK’ – an industry-led independent review carried out on behalf of the Department for Digital, Culture, Media & Sport and the Department for Business, Energy & Industrial Strategy – the case is made for the UK to “become the best place in the world for businesses developing and deploying AI to start, grow and thrive, and realise all the benefits the technology offers”.

Among the key factors which have combined to increase the capability of AI in recent years include: (i) new and larger volumes of data; (ii) a supply of experts with specific high level skills; (iii) the availability of increasingly powerful computing capacity; and (iv) a continuing fall in the barriers to achieving performance.

“The UK possesses an enviable reputation for excellence in AI with cutting-edge innovation, world-class universities, a thriving start-up scene and significant investment growth,” said Jon Andrews, head of technology and investment at PwC. “But in order for the UK to realise the potential gains from AI and keep up in an increasingly competitive landscape, we need to ensure that AI systems are adopted in a responsible way so that every part of society can reap the benefits. We also need to create the right environment for existing and new businesses to innovate and make the most of the product, productivity and wage benefits that this technology can bring.”

The review makes a number of recommendations (18 in all), including: developing data trusts to improve trust and ease around sharing data; making more research data machine readable; supporting text and data mining as a standard and essential tool for research; increasing computing capacity for AI research; recruiting skilled experts to develop AI; and establishing an AI Council to promote growth and coordination in the sector.

Overall, the review recommends that government, industry and academia needs to work together to keep the UK among the world leaders in AI.

Mr Andrews concluded: “It is great to see the review address practical actions the government can adopt in order to support companies in confidently implementing AI, providing secure and safe access to data, developing the research sector, and significantly bolstering the number of people being trained to work in the field.”

Report: Growing the artificial intelligence industry in the UK

Global Logistics expands with $2.8bn European acquisition

BY Richard Summerfield

Global Logistics Properties, which manages around $39bn of logistics assets in Asia-Pacific and the Americas, has expanded into the European logistics market by acquiring Gazeley for around $2.8bn from Brookfield Asset Management. The transaction is expected to be funded by about $1.6bn of equity and $1.2bn of long-term, low-cost debt.

Global Logistics itself is in the process of being taken over for $11.8bn by a leading Chinese private equity consortium which includes Hillhouse Capital and the Hopu Investment Management Company, and is backed by senior executives from Global Logistics. The consortium, which is known as Nesta, will take Global Logistics private in Asia's largest private equity buyout of the year. According to Global Logistics, the deal for Gazeley is not expected to impact the timeline for the company’s privatisation.

In a statement announcing the Gazeley deal, Ming Z. Mei, co-founder and chief executive of GLP, said: “We have been looking to expand to Europe and this portfolio presents an attractive entry point given the quality and location of the assets. This transaction adds a premier operational and development platform for us in Europe and is part of our long-term strategy to expand our fund management business.”

Gazeley’s existing management team, as well as the company’s brand, are both expected to be retained when the deal has been completed.

Global Logistics will be acquiring a considerable asset portfolio in the deal. The company will gain around 32 million square feet of property currently owned by Gazeley, which is concentrated in Europe’s key logistics markets, with 57 percent in the United Kingdom, 25 percent in Germany, 14 percent in France and the remainder in the Netherlands, according to Global Logistics. Europe has long been a focus for Global Logistics; indeed, the company has been talking about expanding into the market for more than 18 months.

The company, much like the wider logistics industry, has seen a rising demand for facilities, driven by a boom in e-commerce. Earlier this year, private equity group Blackstone agreed to sell European warehouse firm Logicor to China Investment Corp for $14.4bn in a deal which further reinforces the burgeoning interest in the global logistics sector.

News: Global Logistic Properties buys European logistics firm for $2.8 billion