Fintechs Most Likely to Get Acquired in 2022, According to Insiders

Ready to go public but reconsidering

Targets: Better, Acorns

Over the past 20 years, tech companies going public have gone from waiting an average of four years to now remaining private for eight or more. Companies that went public last year like Affirm, Coinbase, and Robinhood were all private for eight or more years before making the jump.  

The price correction that lowered the valuations of many newly public companies and potential rising interest rates that will make cash more expensive have caused some private fintechs to reevaluate their plans and push back listing dates, making them prime acquisition targets. 

One such example is Acorns, a trading and savings app that canceled its $2.2 billion SPAC deal with the blank-check company Pioneer Merger in January.

It would make sense for a well-funded fintech like Chime, also targeting younger, more tech-savvy consumers, to buy out the microinvesting app, 312’s Mikula added. 

But other market watchers said Acorns is in a stronger position coming out of its canceled

SPAC

.

Acorns is “much more likely, if the business continues to perform quite nicely, to buckle down for a year and pursue a regular IPO,” according to one fintech investment banker who wished to remain anonymous when discussing individual companies.

One once-lauded fintech, the

online mortgage

startup Better, has been dogged by controversy since CEO Vishal Garg fired 900 people during a

Zoom

conference call in early December. There’s been no public change to the company’s plans to go public through a SPAC merger with Aurora Acquisition Corp. 

Questions swirling around Better’s top leaders and attrition among execs could put the company in gridlock.

“Leadership turnover and uncertainty will erode the company’s capacity to execute in the short term,” according to a partner at a large venture-capital firm.

Better’s chief operating officer and head of capital markets recently resigned from the company. And with Garg back, there’s a reasonable chance investors and stakeholders view his recent controversy as too risky to have him running the company full time, the partner said. 

Meanwhile, Rocket Mortgage, a Detroit-based mortgage lender and Better’s competitor, has taken on Wall Street’s biggest consumer lenders, raking in nearly as many home loans as Wells Fargo and JPMorgan Chase combined. The recent momentum could attract another deep-pocketed fintech or bank to bring in Better’s tech stack and infrastructure in house to take on fast-growing upstarts.

Insider has previously reported that private-equity firms with fintech deal teams and plenty of available capital and experience could become active buyers this year. 

“Private equity is really important in technology M&A because that’s where you start getting the roll-ups and the acquisitions that build value disproportionately fast so companies can eventually go to either a major exit or an IPO,” Jonathan Simnett, a director at Hampleton Partners in London, told Insider.

A managing director at a multibillion-dollar Boston-based PE firm told Insider that his team is very much tuned into fintechs whose valuations were out of reach last year but could suddenly become within budget this year. The firm is also keeping watch of companies that are public but might want to go private again.

Thoma Bravo, a tech-focused private-equity firm in Chicago, has already made moves in that direction. The PE firm announced late last year that it would take the business-to-business payment platform Bottomline Technologies private in an all-cash deal.

PE firms won’t be the only eager buyers. Established fintechs and banks are also keen to cut deals after sitting on the sidelines because of sky-high valuations. But if there’s too much uncertainty and

volatility

in the market, PE might maintain an edge.

“You could see it from the strategic perspective of: ‘We might need a capital partner to help us buy an asset,’ or you could see it from the smaller players’ perspective of: ‘We need to merge and consolidate to be able to get greater scale, reduce cash burn,” a managing director at another Boston-based firm said.