With Fintech flagged as one of the region’s most active sectors for investment in techSPARK’s 2022 Annual Report: South West Equity Investment, there’s no sign of slowing for the lucrative market. 

Local e-commerce scaleup Brightpearl was recently acquired by accounting giant Sage in a £225m deal, and in recent times the South West has seen a plethora of Fintech startups emerge.  

Clearbank and Moneyhub had two of the largest raises in 2022 with £175m and £55m respectively; the former attracting financial investors from across Canada and The Netherlands and the latter striking a deal with strategics including Lloyds Bank. 

Tech-focused investment bank ICON Corporate Finance has closed more than 250 deals for its clients. ICON’s Head of Fintech M&A and Funding Nicky Cotter shares seven pieces of advice for Fintech leaders looking to sell their business. 

1 - Prepare for success

Most vendors will only get one crack at selling a business. It’s clearly a very significant event in one’s life and needs thorough planning and professional execution to ensure that you get the best possible deal. You wouldn’t sell your house to someone who just knocked on your door; you need to market it properly, create a competitive environment and manage the process to make the most from the sale. 

The preparation phase should ideally commence well before the transaction process starts. Sort out housekeeping issues such as litigation, disputes, selling peripheral assets, renewing contracts that have lapsed, formalising informal business arrangements, selling or closing non-core business units and basic tax planning. Due diligence will then be much easier at the later stage of the process. 

2 - Spend your time wisely

Maintaining the balance between running the business and keeping the deal on track requires a huge amount of energy. Time is not your friend during a deal process so make sure you have prepared properly. Amongst other things you need a good management team behind you as you will need to be devolved from day-to-day business issues – selling, delivering, managing. 

Aside from the transaction itself, there will be less obvious, time-consuming challenges which crop up, such as maintaining consensus amongst your shareholders on key issues throughout the process. 

3 - Appoint the right advisors 

Experience counts!  

You will find no shortage of corporate finance professionals with understanding of the sale process. However, you need to ensure they have other qualities too, including a substantial track record in FinTech deals and relevant black book of the investors in and buyers of Fintech companies; financial and strategic.  

It takes six months or more to sell a business so you need to ensure you have a good chemistry with your adviser and make sure that you can get along – you’ll be seeing a lot of each other during the process. You should also look for a hunger, commitment and enthusiasm in your adviser to see the transaction through. 

4 - Keep it confidential

Discretion is an extremely important element of the sale process. When compiling the initial ‘teaser’ one page summary of key information to whet the appetite of potential buyers. The key is to drum up interest without compromising the confidentiality of the business.  

Similarly, once meetings are arranged with strategic acquirers, the number of people involved should be kept to a minimum.  Rumours of a transaction or leaks can erode value and bring chaos to the process.  

5 - Drive competition

To drive the competition for the deal you need to run a robust and efficient process to the buyer groups. Relevance is hugely important to the targets and with your adviser you need to agree on the ‘A’ list of the strategic and financial buyers.  

Following meetings, you need a timetable to ensure that all the purchasers submit offers at the same time. Not only does that allow the vendor to compare offers but it also lets the buyer know that they are in a competitive environment.  

Setting the timetable requires experience; too tight and you might frighten everyone off, too long and you risk losing momentum. The adviser needs to ensure at this stage that the offers contain adequate information for an informed opinion to be made on the preferred bidder. So, in addition to price, they should ask the purchaser to provide details of funding, timetable, diligence and plans for the business in as much detail as possible. 

6 - Negotiation never stops  

Value can be won and lost throughout the process and the experience of your adviser can greatly assist in driving the value of the deal and using their knowledge of when to push and when to back off.  

Also, remember the deal is not done on signing Heads of Terms (‘HoT’s) – it is just the start of the intense due diligence (‘DD’) process when the pendulum shifts from vendor to buyer.  

Never underestimate the intensity of this ‘business end’ of the deal. This where all the pre-deal prep and planning will be tested to the extreme and where the buyer could seek to re-negotiate the deal if matters arise in DD that were not expected. Surprises are usually not good news unless you are smashing through your targets. 

7 - Don’t select your buyer on value alone 

Whilst valuation is a key driver, it is crucial to make sure deal structure, synergies and chemistry are right especially if you have to continue working in the business during any earn out phase.  

This is even more important if you are planning to stay with the business post-sale and help it continue to grow and achieve its greater potential. In this case, you will need more from your acquirer. A shared culture, core goals and belief are key prerequisites of a successful deal. 

For more advice on selling your Fintech business, download ICON’s handy guide or contact Nicky at nicky@iconcorpfin.com

Shona Wright

Shona covers all things editorial at TechSPARK. She publishes news articles, interviews and features about our fantastic tech and digital ecosystem, working with startups and scaleups to spread the word about the cool things they're up to. She also oversees TechSPARK's social media, sharing the latest updates on everything from investment news to green tech meetups and inspirational stories.