The report notes that global M&A (mergers and acquisitions) deal value declined from US$98.2 billion in 2022 to US$56.4 billion in 2023, and that global VC (venture capital) investment fell from US$88.8 billion to US$46.3 billion in the same period.

Australia reflected the global trend, experiencing a 76 per cent drop in fintech deal value in 2023 to US$587.5 million, while the deal count fell by a third to 95 transactions.

Notable Australian fintech deals tracked by the report include taxi payment platform operator A2B’s acquisition by Singapore-listed transportation firm ComfortDelGro for $109.5 million, and deferred payment loan provider Midkey raising US$50 million in early-stage venture capital. In addition, one of Australia’s leading robo-advisers, Stockspot, was acquired by Korean firm Mirae Asset Global Investments, while Rich Data Co. raised US$17.5 million and SME lender Lumi raised an additional US$15 million.

Dan Teper, Head of Fintech at KPMG Australia, said that 2023 was a challenging year for the Australian fintech ecosystem, with both total deal value and deal count experiencing a sharp decline compared to previous years.

“The local market, as with the majority of global markets, has been impacted by a number of challenges including, but not limited to, a higher inflation and corresponding higher rates environment, and a change in overall risk appetite amongst investors,” Teper said.

“Looking ahead, we expect fintech growth in Australia to continue to be modest, and with interest rates unlikely to shift materially in the near term, funding and availability of capital are likely to remain a key challenge for local players,” Teper warned.

Given the ongoing global conflicts, current high interest rates in place, and the continued lack of exits, fintech investment is expected to remain soft for the rest of the first quarter of 2024. However, as interest rates are expected to stablise, and possibly decline, investment could begin to pick up. AI and B2B solutions will likely remain big tickets for investors, and M&A activity could also start to rebound as investors more seriously look at distressed assets.

The post Australian fintech activity on the decline as inflation and interest rates bite appeared first on Inside Small Business.

The commission will examine various ‘consumer protection issues’ such as the state and degree of competition in these services, trends in mergers and acquisitions by social media platforms, the use and abuse of social media services for scams and the role of advertising services including display advertising, paid influencers and sponsored posts employed by businesses.

ACCC chair, Gina Cass-Gottlieb, said the regulatory body is interested in examining ‘trends’ in user preferences and engagement over time.

“We are also eager to receive feedback on the barriers to entry and expansion for social media services in Australia, and if new entrants such as TikTok have changed the competitive landscape for social media services in Australia,” Cass-Gottlieb said.

Interested stakeholders are advised to submit their views to the commission by 9 September. The final report will be submitted to the treasurer by 31 March next year.

This ACCC’s five-year Digital Platform Services Inquiry studies the broader market of supply of digital platform services such as internet search engine services, digital content aggregation platform services, online private messaging services, social media advertising and media referral services.

This story first appeared on our sister publication Inside Retail

The post ACCC probes consumer concerns, competition in the social-media market appeared first on Inside Small Business.

Despite the COVID pandemic, the past financial year has seen increasing activity within the local digital economy.

Besides more SMEs becoming increasingly digital, the pace of mergers and acquisitions (M&A) within the sector shows no signs of slowing down.

We have never had such a strong pipeline of deals and every day we are seeing more opportunities, including for SMEs and emerging companies.

“Today’s digital economy leaders need to be faster moving and more agile than ever before.”

We see six key themes driving the M&A market for the remainder of 2021 and into 2022 as lockdowns gradually wind back:

1. Valuations for tech companies at record levels

Investors are paying a premium for growth – even if it comes from M&A. This is encouraging large private and listed companies to acquire smaller and emerging companies in anticipation of a valuation arbitrage. Large software companies that traditionally traded at six- to eight-times revenue have seen their valuation multiples trend upwards over the past two years and it is not uncommon for software as a service (SaaS) companies growing at 20 per cent plus a year to be valued at above 15-times forward revenue.

2. Increased demand from global buyers

The relatively small size of the Australian market also leads many Australian technology companies to focus on international markets at an earlier stage than their competitors in the US and UK. This global focus makes these Australian-based companies attractive to large global strategics and international technology investors. Australia has a strong reputation for producing world-class technology companies. In addition, many of these companies have been bootstrapped, making them more efficient than their international competitors that have been built with external capital.

3. The rise of alternative debt funding

There has been a significant increase in the number of venture and mezzanine debt funds in the Australian market. A number of these funds will even lend to companies that are loss-making if they can see a path to break-even and the business has strong recurring revenues. Many of these lenders will also fund M&A transactions with less restrictive covenants than offered by traditional lenders.

4. Organic growth is challenging and expensive

In many sectors it has become increasingly difficult to grow organically, especially by entering new markets and for businesses such as enterprise software and IT services. This trend has partially been driven by COVID, which has disrupted traditional face-to-face sales processes and slowed decision making.

The shortage of talent is also a key factor limiting the growth of many digital economy businesses. The opportunity cost from labour shortages is pushing boards to consider more favourably acquiring businesses that have good quality teams and high levels of automation.

5. Private equity is embracing the digital economy

The emergence of tech-focused private equity had driven a wave of deal-making. It is becoming increasingly common for these funds to outbid strategics for high-quality businesses, including emerging companies.

Private equity portfolio companies typically regard M&A as a key growth strategy. They tend to move faster and often more decisively than strategic acquirers. Low interest rates and tech-friendly lenders are also fuelling a wave of leveraged buyouts and portfolio company M&A with debt covenants often linked to annualised recurring revenue rather than EBITDA (earnings before interest, taxes, depreciation and amortisation).

6. Sellers are embracing a strong market to cash-out

The volume of unsolicited inbound interest and reports of record high prices are prompting founders and boards to consider selling earlier than may otherwise have been the case.

Founders and boards are also finding it increasingly difficult to scale their businesses due to the shortage and cost of talent and the challenges posed by COVID.

The strongest M&A markets we are currently seeing are in the fintech and enterprise software sectors. There is huge demand for companies that sell to a global market and are growing rapidly.

Telcos

We are also seeing a significant amount of M&A activity in the IT and telco sectors, where listed players are often trading on multiples well above ten times EBITDA and they can repeatedly buy good-quality smaller businesses for five or six times EBITDA. We have advised on and witnessed over 40 deals in this sector over the last few years and we continue to experience strong interest from buyers for the companies we are selling.

Companies like Unity, Spirit Technologies, Tesserent, 5G Networks, Over the Wire and RXP (itself now rolled up by Capgemini) have been incredibly active. Competing for this consolidation are PE backed companies like Nexon, backed by EQT and CyberCX, backed by BGH, which have rolled up more than a dozen players in the communications and IT services sectors.

These well-funded players are outbidding larger strategics – the competition is fierce.

In the current market, listed and private equity backed companies were being rewarded for scale – so the faster they are able to acquire, the more accretive the potential value. There comes a point, though, when the market wants to see they have been able to integrate their acquisitions and promised synergies are being realised.

Growing Australia’s technology industry

Australia’s technology industry currently contributes around 6.6 per cent of GDP and employs over half a million people. However, technology firms in the US represent four times the share of those in Australia, highlighting the potential for growth in the domestic market.

Today’s digital economy leaders need to be faster moving and more agile than ever before.

Emerging companies need to ensure they can deliver, and deliver at scale, in order to compete with global companies that are looking to claim a slice of the expanding Australian market.

An emerging Aussie success story

TASK Software is a great example of an emerging Australian business that is beating some of the world’s largest enterprise software companies to supply its point-of-sale software to major brands like Starbucks and Crown Casinos.

TASK had been inundated with inbound interest from financial and strategic buyers but its recent deal with Plexure allowed the team to continue to build the business as part of a larger ASX-listed story.

This article first appeared in issue 34 of the Inside Small Business quarterly magazine

The post Tech takeover appeared first on Inside Small Business.

Here’s our quick guide:

Expressions of Interest (EOIs) are used by government, large and listed companies to test the market, often to identify options for delivery of a future service or project. EOIs ask a series of questions about your company’s skills, experience and an outline of how you would deliver the project or service. The main difference between an EOI and a formal request for tender or bid is that pricing is rarely asked for. 

Requests for Information (ROI)

An ROI is similar to an expression of interest. Government, large and listed companies are seeking to understand what’s available in the market. Just like an EOI, an ROI asks questions about your company’s skills, experience and how you would deliver the project or service being sought.

Companies shortlisted following an EOI or ROI are later invited to respond to a formal Request for Tender or Request for Proposal.

Requests for Tender (RFT)

RFTS are issued by a company or government when it wants organisations to submit their credentials to deliver a project, service or product. Companies responding to a request for tender are ‘tenderers’.  

A request for tender comprises a series of documents including a prescriptive scope of works, draft contract and response schedules. Tenderers must complete and submit the response schedules – this is their tender. 

The response schedules will ask about the tenderer’s experience, people, how it will deliver the scope of works, plus pricing, insurances, policies and technology, among other things. 

Bids or Offers

Bids or Offers are when a company is approached by another asking it to ‘bid’ or ‘make an offer’ to provide a service or product. Bids or Offers can be informal or formal. Formal ones comprise a Request for Offer (or Bid) document, which the responding company (the ‘Bidder’ or the ‘Offerer’) has to complete and return.  

Equally, a Request for a Bid or a Request for Offer can be more relaxed, such as a letter attached to an email, asking the recipient to provide its bid or offer to provide its service or product. In these cases, there is no formal response template to be completed. 

Proposals

Just like bids and offers, proposals can be one of two types: 

• Requests for Proposals (RFP). These are exactly like tenders. Acompany or government issues a Request for Proposal for a project, service or product that it needs. Companies responding to a formal Request for Proposal are ‘respondents’. Just like RFTs, Requests for Proposals can be very prescriptive about how the service, product or project needs to be delivered. At other times, though, even a formal RFT will ask for a ‘proposal’ – that is, ideas about how the product, service or project can be delivered. 
• Informal proposals are when a company invites a potential or existing supplier to provide a proposal to supply a new or additional product, service or project. There is no formal Request for Proposal and so the potential supplier can decide what to include in its proposal. This type of proposal needs to be a client-focused selling document. It must be tailored precisely to the prospective customer’s needs, best discussed at a prior meeting. 

Whilst there’s a range of terminology used, most terms relating to tendering and bidding are used interchangeably. So, next time you hear someone talking about a bid, they most likely mean a tender or proposal opportunity.

The post EOI, RFT, RFP, RFI – what does it all mean? appeared first on Inside Small Business.