Sep 19, 2023

To embed, copy and paste the code into your website or blog: <iframe frameborder="1" height="620" scrolling="auto" src="//www.jdsupra.com/post/contentViewerEmbed.aspx?fid=4a82efd4-284e-4c5a-b061-f8e49b561b6d" style="border: 2px solid #ccc; overflow-x:hidden !important; overflow:hidden;" width="100%"></iframe> Appetite for consolidation increases as niche lenders seek access to new geographic markets and cutting-edge distribution technology. Overview We are seeing Continued availability of growth capital for specialty lenders—SME lenders attract the most capital in the previous 12 months VC debt cheques (e.g., Quilam Capital's debt investment in Merchant Money and Fasanara Capital's debt investment in Novicap) Bank equity cheques (e.g., CIBC's equity investment in Ageras) Bank debt cheques (e.g., Barclays debt investment in Merchant Money) New entrants partner with well-established lenders in uncharted verticals (e.g., B2B BNPL partnerships between Hokodo and BNP Paribas as well as between Two and Santander) Consolidation amongst specialty lenders gathers pace: Rankings 1st Selected market examples Bibby's acquisition of Aldermore's working capital finance business; Dock Financial's acquisition of Compeon; and Qonto's acquisition of Penta Lei Shing Hong Capital's acquisition of HS Credit (Manchester); and OakNorth's acquisition of 50% of ASK Partners AvtoVAZ's acquisition of RN Bank; and Lloyds' acquisition of Tusker Key drivers/challenges Established banks react to specialty finance in different ways: Exiting non-core business lines (e.g., Aldermore Bank's disposal of its working capital finance business and Handelsbanken's disposal of its Finnish SME lending business) Bulking up core business lines through acquisition of whole businesses (e.g., Lloyds Banking Group's acquisition of Tusker) Bulking up core business lines through acquisition of majority stakes (e.g., OakNorth's acquisition of 50% of ASK Partners) Providing working capital loans (e.g., Lloyds Bank's £120 million loan to LendInvest) Tying-up with niche lenders (e.g., BNP Paribas's B2B BNPL tie-up with Hokodo and Santander's tie-up with Two) Consolidation driven by: Long-only investments in well-placed bets (e.g., M&G's acquisition of 41% of Finance Ireland) Swallowing market leaders (e.g., Dock Financial's acquisition of Compeon) Cutting-edge technology (e.g., Tide's acquisition of Funding Options) Specialty lenders search for untapped/underserviced niche markets: E-commerce entrepreneurs (e.g., Uncapped's partnership with LianLian) Small and micro-businesses (e.g., Ezbob's partnership with Israel Discount Bank) Trends to watch Continued reformation of market perception as technology-enabled providers prove themselves to be reliable debt sources Uncertain market climate fosters tentative approach to SME and micro-business lending by traditional banks—these communities continue to be underserviced Specialty lenders place significant competitive pressure on traditional lenders (e.g., in 2022, niche lender banks lent more than their traditional counterparts to small businesses—£35.5 billion) Our M&A forecast M&A to remain constant amidst uncertain market conditions. Consolidation activity is likely to be spurred by increasing borrower appetite, as traditional lenders focus bandwidth on higher margin lending. Other financial services—Publicly reported deals & situations Growing buyer/investor/partner interest Deal highlight: White & Case advised Development Partners International and MNT-Halan, the leading consumer finance and microfinance fintech in Egypt, on the sale of c.20% of MNT-Halan to Chimera Investments. Private equity/venture capital: Balderton Capital (Lending marketplace): Participation in US$29 million Series B funding round for TreasurySpring (June 2023) M&G Investments (SME lending): Participation in €275 million private debt funding round for Teylor (June 2023) Aegon Asset Management (SME lending): Participation in €50 million debt funding round for Factris (April 2023) Quilam Capital (B2B lending): Participation in £115 million debt funding round for Merchant Money (February 2023) Chimera Abu Dhabi (SME lending): Acquisition of 20% of MNT-Halan (February 2023) Team8 (Trade finance): Participation in US$111 million seed funding round for 40Seas (January 2023) Fasanara Capital (SME finance): Participation in €200 million debt funding round for Novicap (December 2022) Fasanara Capital (Revenue-based financing): Participation in €50 million debt funding round for Karmen (November 2022) Serena Ventures (Micro-finance): Participation in US$12.5 million Seed funding round for Numida (September 2022) Manx Ventures (AutoFinance POS): Acquisition of 50.1% of Payment Assist Limited (September 2022) DASH Ventures and Edgo (P2P lending): Participation in €18.5 million pre-Series B round for Liwwa (September 2022) FIs: Barclays (SME lending): Participation in €275 million private debt funding round for Teylor (June 2023) Barclays (B2B lending): Participation in £115 million funding round for Merchant Money (February 2023) Lloyds Bank (PropFinance): Participation in £120 million post-IPO debt funding round for LendInvest (January 2023) Bank al Etihad (P2P lending): Participation in €18.5 million pre-Series B round for Liwwa (September 2022) Non-FIs: Availability of growth capital TreasurySpring (Lending marketplace): Successful US$29 million Series B funding round led by Balderton Capital (June 2023) Teylor (SME lending): Successful €275 million private debt funding round led by Barclays and M&G Investments (June 2023) Factris (SME lending): Successful €50 million debt funding round led by Aegon Asset Management (April 2023) Merchant Money (B2B lending): Successful £115 million debt funding round led by Barclays and Quilam Capital (February 2023) LendInvest (PropFinance): Successful £120 million post-IPO debt funding round led by Lloyds Bank (January 2023) 40Seas (Trade finance): Successful US$111 million seed funding round led by Team8 (January 2023) Novicap (SME lending): Successful €200 million debt funding round led by Fasanara Capital (December 2022) Karmen (Revenue-based financing): Successful €50 million debt funding round led by Fasanara Capital (November 2022) Numida (Micro finance): Successful US$12.5 million Seed funding round led by Serena Ventures (September 2022) Liwwa (P2P lending): Successful €18.5 million pre-Series B round led by DASH Ventures, FMO, Edgo, Bank al Ethiad and DEG (September 2022) Ageras (SME lending): €35 million equity investment from CIBC Innovation Banking (August 2022) Specialty finance businesses consolidate AvtoVAZ (Automotive finance): Acquisition of RN Bank (June 2023) Oma Savings Bank (SME lending): Acquisition of Handelsbanken's Finnish SME lending business (May 2023) Lei Shing Hong Capital (PropFinance): Acquisition of HS Credit (Manchester) (March 2023) Lloyds Banking Group (Automobile finance): Acquisition of Tusker (February 2023) Dock Financial (SME lending): Acquisition of Compeon (January 2023) Tide (B2B finance): Funding options (November 2022) Münchener Hypothekenbank (PropFinance): Acquisition of 60% of M.M.Warburg & CO Hypothekenbank (November 2022) OakNorth Bank (PropFinance): Acquisition of 50% of ASK Partners (October 2022) Ageras (Financial marketplace): Acquisition of Kontist (July 2022) M&G Investments (PropFinance & Leasing): Acquisition of 41% of Finance Ireland (July 2022) Qonto (SME lending): Acquisition of Penta (July 2022) Partnering to brave the uncertain market climate Hokodo (B2B BNPL): B2B BNPL JV with BNP Paribas (March 2023) Ezbob (SME and consumer lending): Greenlend SME and consumer lending JV with Israel Discount Bank (March 2023) Two (B2B BNPL): B2B BNPL JV with Santander (January 2023) Uncapped (Entrepreneur finance): US/UK e-ecommerce entrepreneurs and merchants lendtech JV with LianLian (August 2022)