Market Loop - 🎉UK fintech is booming

FINTECH
UK fintech investment jumps x7 to $37bn

What’s going on?
Last year British financial technology firms received $37bn in investment, up from $5bn the year before, according to research from KPMG. That means the UK attracted more investment than the rest of Europe, the Middle East and Africa (EMEA).

Why is this important?

In 2021 there were a record 601 deals involving British fintechs, ranging from takeovers and mergers to private equity and venture capital investments, compared to 470 in 2020. 

Despite the record investment, the UK’s share of the global pie was still relatively small. Total global fintech funding hit $210bn across a record 5,684 deals last year.

Half of the ten biggest deals in EMEA took place in Britain. Standout deals included the multibillion dollar fundraises by payment processor Checkout.com and banking app Revolut and JP Morgan’s $989m acquisition of wealth manager Nutmeg.

Breaking down between sectors, payments attracted the most funding, making up $52bn investment, up from $29bn the year before.

Investment in payments was fuelled by a surging interest in areas like buy now, pay later. A recent study revealed that usage of these services has exploded during 2021 with nearly a fifth of UK adults now using payments services from firms like Klarna and Clearpay at least once a month.
 

INSURANCE
Insurers restart merger talks

The British life insurance sector is not known for high drama but over the past few months LV and Royal London have been making headlines in an ugly takeover battle.

Last December members of LV previously known as Liverpool Victoria, voted against a £530m takeover by US private equity firm Bain Capital that had been announced a year earlier. The vote had been highly publicised with the Daily Mail and some MPs campaigned against it.

The deal had provoked a backlash as it would have seen LV lose its mutual status, whereby it’s owned by its members, after 178 years. 

It was also controversial as the 1.2m members would each only get about £100 while the investment banks advising LV would get millions, one of whom is the Conservative Party treasurer. 

Along the way fellow mutual insurer, Royal London, stepped in with a counter offer of £540m which, despite £10m more, LV’s board rejected.

The bad blood between the two sides became very clear when, just before the crucial LV members vote, LV's management accused Royal London of trying to "destabilise" the deal with the counter offer.

Then yesterday two months after the collapse of the Bain deal, LV confirmed it was in talks with Royal London.

LV’s board and management had argued that the business had little future as a stand-alone company, being too small to compete with better funded peers.

A merger with Royal London would be an easier pitch than a private equity deal to members as it would mean both insurers would keep their mutual status.