The ARC, Ethos R1.5bn Investment in Crossfin

  • Market Overview

Investment by private equity and venture capital firms in the fintech space is surging so far this year having reached new highs and has emerged as one of the major trends in M&A. We had our own insight into the incredible entrepreneurism in this sector when recently advising Sybrin in its search for a buyer with dry powder cash reserves.

Sybrin, a low code and artificial intelligence (AI)-enabled enterprise software business targeting the financial sector, and is today within the Crossfin group. Driving these deals is the global appetite for increasing diversification in hubs and subsectors.

As a result, fintech valuations remain high in 2021 as investors continue to see the space as attractive and well-performing. What is driving this is the pressure businesses find themselves under to increase the velocity of their digital transformation and to enhance their digital capabilities. The pandemic has opened corporate eyes to the need to transform digitally and many have realised it’s quicker to do so by partnering with, investing in, or acquiring fintechs.

What we are seeing in the fintech space is increased funding rounds, high valuations and successful exits which serve to underscore the hypothesis that the digital engagement of customers that accelerated during the pandemic is here to stay.

While most of this is occurring in the US, Europe and Asia-Pacific, we are similarly seeing uncommon interest in South Africa – using this country as a base to expand into Africa. We recently saw the announcement of Vantage Data Centers plans for a R15-billion Johannesburg campus at Attacq’s Waterfall mega-development, which promises to be the largest ‘hyperscale’ data centre in Africa.

Looking forward to 2022, I expect fintech investment to remain at a high level in South Africa as much as the rest of the world. The payments space should remain a dominant driver of fintech investment, with increasing levels of investment also in banking-as-a-service models, revenue-based financing solutions, and B2B services. What is also grabbing corporate attention at the moment is the increase in cyberattacks and ransomware, so that cybersecurity solutions are also high on the radar of private equity investors.

Fintech is an incredibly active area of investment right now—and that’s not something I expect to change anytime soon.

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