BREXIT has set M&A activity in the peer-to-peer lending sector back by six to twelve months, according to the head of an investment bank.
Last year, Jason Purcell, chief executive of First Capital, predicted that there would be an M&A boom in the P2P sector, but it has failed to materialise.
“The key change is Brexit, and we certainly saw a pull-back in activity at the funding level in the second half of last year, and a lot of people were trying to work out the implications for the sector,” said Purcell. “But in the first half of this year we’ve seen funding come back slowly.
“In the early days, buyers were really ignoring fintech as an area for investment. 31Then they started partnering, then investing, and the next stage of the cycle is looking at M&A.”
A recent report from Innovate Finance found that venture capital investments into fintech were up by 37 per cent in the first half of this year, although inflows were still lower than they were in 2015. Purcell pointed out that this was likely due to the Brexit effect.
“From an M&A perspective, [Brexit] has probably set us back a bit,” he commented. “There’s a long-term view that in time the incumbents will look to acquire in the P2P space, but Brexit has had its implications on the big banks as well. I think they’ve been focusing on those areas and not spending time and effort on M&A.
“We’ve definitely lost six or 12 months because of Brexit.”
However, Purcell said that deal activity is likely to pick up towards the end of the year, following a funding boost in the first six months of 2017.
“I think long term we will see consolidation happening in the marketplace,” he added. “M&A tends to run on a longer cycle so what we’ve seen in the first half of this year is that funding is coming back.
“In the second half, I’d say M&A will start to come back. This will be a core thing at the end of this year and into next year. I don’t see the market suddenly consolidating – I think it’s going to take time. But it will interesting.”