Fintechs Are Building Corporate Development Teams to Ramp up M&a

• Fintech M&A is set to boom as startups, flush with cash, look for ways to compete.
• Some fintechs are building out small but formalized corporate-development arms.
• It could be a draw for junior bankers at traditional financial companies.

After a year of record fundraising and IPO exits, financial-technology companies are flush with cash and armed with more experience. 

Now, many are positioning themselves to cut their own deals. 

Fintechs are building out internal corporate-development teams, having reached the scale and maturity to source and land deals themselves amid an ongoing blitz in fintech M&A. 

These teams, which can focus on everything from strategic partnerships to outright acquisitions, offer a more personal touch than external advisors due to the fact they sit within the firm, experts say. 

“The trend is more to build the capability in-house, because of the frequency of transactions and to supplement areas that you may not have been able to build as effectively,” Vrinda Johnson, a managing director that does executive recruiting at Raines International, told Insider.

“You can’t have a team of due diligence analysts on payroll constantly, unless you are transacting at the pace that a PE firm or a VC firm might transact. However, you can have a smaller team or you can have a head of corp dev that can lead the effort internally with the business’s best interests at heart — not that professional services don’t, but that has a different lens,” Johnson added.

It’s a shift that’s leading to more investment-banking talent — particularly junior employees — heading for the exits of bulge-bracket firms as startups look to bolster teams with people who have dealmaking experience.

This January, Insider detailed how top headhunters have seen fintechs pressure banks by poaching their talent.

Partnership and corporate development roles represent one of the hottest hiring areas among fintechs, Dean Nacey, a partner at SPMB Executive Search, told Insider.

“Banks are losing the talent war to big tech,” Nacey, whose firm has worked with the likes of Plaid, Chime, and Robinhood, told Insider. 

Meanwhile, banks have struggled to hold on to younger talent that has become enamored with the startup lifestyle. It’s a movement that mirrors similar hiring trends during hot market cycles in 1999 and 2007, a senior investment banker told Insider. 

“It makes retention harder for junior and mid-level staff,” they said.

M&A teams are a ‘tool in the tool belt’

A look at just a few of the fintech deals struck over the past year shows the extent to which startups are looking to orchestrate their own transactions. 

Public.com made its first acquisition in January with a deal for financial data-visualization site HyperCharts. The trading app, which raised a $200 million Series D in February 2021 that doubled its valuation to $1.2 billion, sourced the deal without outside advisors, the startup’s co-CEOs told Insider. 

Betterment’s March 2021 deal for WealthSimple’s US book of business was also done without external advisors. The fintech has built out a three-person corporate-development team, Betterment’s CFO, Peter Lorimer, told Insider.

Lorimer views the members of the team as “mini product managers” who also have a background in traditional financial services. “They have dedicated coverage, specific into domains” like retail and business partnerships, he added.

Card-issuing fintech Marqeta has seen the number of inbound investment and acquisition opportunities “tripled or quadrupled” since the company’s IPO in June 2021, Renata Caine, the firm’s vice president in charge of international strategy and planning, told Insider.

Prior to the IPO, Caine was tasked with building out a separate team focused on partnerships, M&A, and venture investing. 

The team, which started out with a staff of two, added Blake Clifton in December as a vice president of corporate development. Clifton had previously spent two years in IT consultant Cognizant’s M&A practice and more than seven years in TMT banking at Wells Fargo.

The group now represents one-fifth of the employees reporting to Caine. 

To be sure, fintechs’ desire to build out corporate-development teams doesn’t mean they plan on shutting out bankers. 

Including or excluding bankers on any given deal “doesn’t feel like an either, or,” the head of another large fintech’s corporate development team told insider. Internal development arms just provide fintechs, particularly later-stage names that have the reach to make deals, more control over their own corporate futures. 

M&A is “one tool in the tool belt” that founders and executives can look to lean on, the executive said. 

“A lot of them are spinning up and focusing on growing these teams in-house because they want to make sure that their customers and the employees that have built the great products all work really well together,” the executive added. 

Take finance app MoneyLion, which inked deals for content-creation firm Malka and embedded-finance marketplace Even Financial after raising $340 million when it went public in September. 

Both deals involved advisors, but MoneyLion CEO Dee Choubey credited the company’s internal team with laying the groundwork for the transaction. 

And yet even as larger fintechs take on more advisory work internally, investment banks don’t seem to be feeling the heat of any competition from the companies they might have once advised. 

The deals fintechs are coordinating with other startups aren’t “true corporate takeovers,” and are typically too small to be handled by bulge-bracket firms, the investment banker said.

It was a sentiment echoed by Lorimer, who said that Betterment’s internal team focuses more often on the sort of smaller, frontier dealmaking and investing overlooked by bulge-bracket banks. 

Underscoring that, PJT Partners served as financial advisor to Betterment in the startup’s recently announced acquisition of Makara, a crypto-focused robo-advisory service. 

Fintechs represent new competition in the battle for talent

And while investment banks might not fear losing business, they are threatened by the potential loss of talent these new teams pose.

Fintechs’ corporate-development teams are putting additional pressure on an already competitive market for talent.

The nature of corporate-development work, which entails looking for ways to inorganically grow a company’s user base or product set through partnerships or acquisitions, lends itself to investment bankers. 

As Betterment’s Lorimer said, “experience in all things inorganic requires deal experience.”

MoneyLion has also seen value in hiring those from traditional finance, Jon Stevenson, the fintech’s head of corporate development, told Insider. 

When it comes to recruitment, bankers are also looking for more hands-on, operational business experience, he added.

“You’re seeing business lines, you’re seeing a whole plethora of functional responsibility, as well as the transactional side of it,” Stevenson said of roles on the corp-dev team. 

Marqeta’s Caine is also keen to add more people with a formal banking background to her team, which is looking to fill at least two more open roles. She values someone who understands “the fundamentals of how to build an M&A practice, how to run diligence teams, and how to use the different resources, whether they be institutional banks or different consultants, that you might leverage along the way,” Caine said.

“I could give that person and teach the person that fintech and payments experience, but I need someone who could run a really strong M&A practice,” she added.

Meanwhile, banks are starting to notice fintechs’ interest in attracting people with experience in traditional finance.  “There is definitely a trend” among private companies to tap Wall Street talent “to bring some of that DNA in-house,” the investment banker said. 

To be sure, not all fintechs in the process of growing their corporate development teams are doing so by hiring from finance.

The chief business officer of one fintech, based in New York, told Insider that the company’s deliberately small corporate development group is aligned with its partnership team. The fintech, which has a “handful” of employees working on development, is planning on hiring in anticipation of further M&A activity, but is looking to people with tech partnership backgrounds, not financial ones. 

And it remains to be seen if fintechs will maintain these growing teams or see a pullback should the decline in public market names drag on. 

“I would anticipate that 50% of the people who walked out the door will be calling me in 18 months. I hope that’s not the case, but I’m too old and jaded, having seen this movie multiple times now,” the banker said.