Fintech investment steady, focused on quality over quantity

14 December 2017

Venture capital investment into the FinTech space continued tentatively into the third quarter, with investors increasingly weary of Angel / Seed investment, but more likely to offer high deal values to companies they see as offering strong fundamentals. Overall investment from VC, PE and M&A into the FinTech segment came in at $8.2 billion in Q3, a strong result relative to the year previous.

Financial technology firms are increasingly creating headaches for traditional firms, with a recent report highlighting their ability to nimbly target high-value areas of traditional firms’ revenue models. The rapid rise of Bitcoin, meanwhile, has the potential to create disruptive dynamics, as new players quickly rise on the back of funds pouring into the system.

However, while the destiny of bitcoin et al, is all but certain, current trends have seen investors, from venture capital (VC) to private equity (PE) and strategic M&A, take an interest in the segment. In a bid to map performance within the segment, KPMG takes a quarterly pulse of the market.

Global investment activity

The latest figures (Q3 2017), highlight continued concern in the wider start-up investment scene continuing to hold. However, values were relatively robust on the start of the year, and on the same period last year, coming in at $8.2 billion. The number of closed deals declined slightly, on the same period last year to around 270, although, overall, deal activity is the lowest seen since Q4 2013.

The continued nascent status of many of the technologies, and their relatively disruptive potential, has resulted in continued activity in the space. Ian Pollari, Global Co-Leader of Fintech, KPMG International, remarked, “Fintech continues to rapidly evolve on a global level with an increasing diversity of funding participation and sources, geographic spread and areas of interest. We are seeing the emergence of FinTech leaders in specific jurisdictions looking to scale their platforms internationally, while technology giants move into adjacencies. This is a trend that is expected to continue and will represent a growing concern for incumbent financial institutions, forcing many to take bolder steps in response.”

Global VC activity in fintech

In the VC space, volumes were hit in the latest round. The Angel / Seed round was particularly hard hit, dropping from around 100 to around 60, while both early and late VC activity too saw declines, although not nearly as steeply. While volumes were down, the research did note that respondents remain key to back their portfolio with their cheque books, invested capital climbed to around $3.3 billion, from the $3 billion mark in the previous quarter. Value, overall, has climbed in recent quarters from the dip in Q4 last year.

The fall in deal volume, coupled with the rise in deal value, is part of an international cross-market trend. Throughout the year, investment in European businesses has seen steadily increasing value, with decreasing quantity, as investors rated quality over quantity amid turbulent economic conditions.

The analysis notes that venture funding provided increased for each of the categories, with the Angel / Seed stage up $0.4 million to $1.4 million, the Early VC phase up from $5.1 million to $5.5 million, while the late stage has remained stable at a median $16 million.

Global venture-backed exit activity in fintech

Exits have shown a stronger relative performance to last year, although the figures were buoyed by large deals – such as the $850 million acquisition of Intacct by Sage Group in the most recent quarter. Exit activity continues to favour strategic acquisitions, although IPOs have ticked up, as valuations and market expectations creep closer. Deal value hovered around the $1.5 billion mark, a significant fall on 2014 and 2015, when figures were almost double.

One area that has garnered significant attention in recent weeks is bitcoin and alternative currencies. Speculative forces pushed the value of coins to record heights, while various initial coin offerings (ICOs) saw around $500 million be shelled out to own – what, remains unclear. Investment in start-ups was down slightly, the drop in venture funding from close to $400 million in 75 deals in 2016, to year-to-date for the first three quarters, $171 million in 52 deals.

Global venture investment in Blockchain companies

Interest among various players in the potential of Blockchain technologies remains strong. Considerable risks remain, with bitcoin exchanges becoming vast hubs for wealth transfer, while cross boarder payments may be significantly boosted in ease from the technology. Financial institutions remain active in the space, with various consortia working on use cases and commercialisation.



RSM sells controversial UK wealth manager out of administration

26 March 2019

RSM has overseen the sale of UK financial advisory firm Mount Sterling Wealth out of administration. The company had fallen into insolvency earlier in March, but has been purchased by Quilter Private Client Advisers for an undisclosed fee.

Mount Sterling Wealth is a York-based financial advisory firm, offering financial planning and wealth management services to clients from offices in Mayfair and North Yorkshire. Founded in 2010, the firm has endured an acrimonious relationship with the UK’s businesses community, having been formed by Scott Robinson to move his clients from an old firm, after being sued for advising on investments which failed and were not covered by professional indemnity insurance.

Robinson was allowed to continue working as a financial adviser by the Financial Conduct Authority (FCA), despite being ruled against in court and avoiding further legal action after liquidating his company. The controversial decision of the regulator caused Conservative MP Kevin Hollinrake to state the FCA needed "to take a long, hard look at itself" for allowing Robinson to continue trading.

RSM sells controversial UK wealth manager out of administration

That comment was prompted by the case of Hollinkrake’s Thirsk and Malton constituent, Andy Mohun-Smith, who according to the Yorkshire Post, lost £2 million after trusting Robinson (one of Mount Sterling Wealth’s two Directors alongside David McLaughlin). Mohun-Smith also claimed the saga had a “devastating” impact on his life and health, with the stress involved “undoubtedly a major factor” in the break-up of his marriage.

As a result of the chequered history of one of its Directors, there was little sympathy expressed for Robinson’s firm when it fell into administration in March 2019. Mount Sterling Wealth was placed into administration following historic financing issues, appointing Jamie Miller and Gareth Harris of RSM as joint administrators to oversee the sale of its assets. The York-based firm had around £100 million in assets under administration.

Mount Sterling Wealth has since been sold out of administration, in a deal that preserves both jobs and the continuity of service for its clients. The financial planning and wealth management practice was sold to Quilter Private Client Advisers for an undisclosed fee.

Jamie Miller, RSM restructuring advisory partner and joint administrator, said: "I’m pleased to confirm that the deal preserves all jobs, ensures continuity of service for the company’s large portfolio of private clients and business owners and should result in significant returns for both secured and unsecured creditors which is an excellent result in the circumstances."

Commenting on the acquisition, Dominic Rose, Strategy and Acquisitions Director at Quilter PCA, said, “Mount Sterling Wealth was placed into administration following some historic financing issues. RSM was appointed joint administrators and the business was then sold to Quilter Private Client Advisers. Mount Sterling Wealth’s portfolio of clients will now be serviced by Quilter PCA’s by London, Chester and Shipley offices ensuring continuity of service. In addition, one adviser will join Quilter PCA.”