Strategic upheaval in the $1.6 trillion payment markets

Strategic upheaval in the $1.6 trillion payment markets

Payments is changing more rapidly now than ever before. Both corporate and individual customers no longer tolerate paying large fees for what are essentially commodity services, transferring money securely.

Fueling this change, over $50bn of M&A and an unprecedented amount of capital has flowed into the global payments industry in the last 2 years alone, according to a global review of corporate development activity in the payments industry by Magister Advisors. At the current run rate more than 10% of the entire payments technology industry will change hands in the next 5 years.

This wave of activity is being driven by several factors.

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The ‘logic’ of Uber’s uber-round

The ‘logic’ of Uber’s uber-round

A lot has been written about Uber’s latest financing round (mostly, about the reported of $50bn+ valuation), in the context of the current ‘herd’ of unicorns (apparently, 10 new horns sprouted in the last month).

Indeed,
@Mark Tluszcz @MangroveVC posted “Uber: $400 million in revenues in 2014, new funding round at $50 billion. Hum, let me see….insanity is the first word that comes to mind”, leading one entrepreneur to ask: “If $50bn is correct then what kind of growth rate would it need at a reasonable discount rate?”

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Welcome to Wonderland – There are Nearly 100 Unicorns Here

Welcome to Wonderland – There are Nearly 100 Unicorns Here

90 is the current number of ‘unicorns’ in the field, meaning private tech/internet companies with valuations of $1 billion+.  There were 12 at a single Collision event in Las Vegas in May.  Xiaomi is ‘worth’ nearly what Facebook was worth 2 years ago, around $50 billion.

This is, patently, ridiculous, and is fuelled by a number of factors that inevitably lead to over-valuation.

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Board Packs – innocuous and normal, but they can kill high value M&A deals

Board Packs – innocuous and normal, but they can kill high value M&A deals

Late stage growth companies often reveal far too much ‘dirty laundry’ in monthly packs prepared for their board meetings. In normal practice this is fine to stimulate debate and ensure transparency. But when that company is being sold in a high value M&A deal, these packs can give buyers cause to worry about things they might never have thought to ask.  Worst case, they can lead to a major price reduction late in due diligence, and we know they have even killed a few deals.

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Why we bet Acunu would be a high value M&A target

Why we bet Acunu would be a high value M&A target

It has been belatedly reported that Apple acquired Acunu for its big data analytics technology. Magister is pleased to have advised the board of Acunu Ltd.

One of the major themes we have pursued at Magister is big data infrastructure and analytics.  Needless to say, despite the number of companies positioned as ‘big data’, actual leaders in the space are few and far between, all the more so in Europe.

However, Acunu stood out: recognised leadership (#2 in the world for Cassandra commercialisation), world-class technologists and pedigree (with a plethora of PhDs from top computer science universities), and deep technical insights to solve hard problems in an important technology.

Of course, special companies require a special approach, and in this case the approach was pizza.  For an investment bank we are unusually focused on underlying technology and connected with Acunu founder Tim Moreton at a London Big Data Meetup where he was explaining a novel approach to real-time analytics on Cassandra.  The pizza was o.k. – the technology exceptional.

Following our successes with other ‘deep technology’ exits we were confident that, despite the commercial challenges of scaling such a company in Europe, the company would become strategic in a short period of time.

Needless to say, we are very happy to have been proven right.

Congratulations to the full Acunu team and investors.

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Apple’s Watch is the latest in a long line of breakthrough ‘over the top’ technologies that reshape the valuation of the tech industry

Apple’s Watch is the latest in a long line of breakthrough ‘over the top’ technologies that reshape the valuation of the tech industry

Technology breakthroughs often focus on new operating systems, devices, or major semiconductor developments. But one of the most significant, yet under-reported, trends is for technology companies to ‘leapfrog’ each other with ‘over-the-top’ (OTT) technologies. It is this trend that often defines the battle for supremacy in the technology industry.

Technology goes ‘over-the-top’ when deployed on top of existing hardware and software, coming a key step closer to the end user. Because this new technology then controls the user experience, and grabs mind-share, it renders the technologies below it far less valuable, and in time, turns them into mere commodities.
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Apple, Oracle are the “Gold Standard” in Tech M&A; 5 mistakes the others make

Apple, Oracle are the “Gold Standard” in Tech M&A; 5 mistakes the others make

Apple, Oracle are the “Gold Standard” in Tech M&A; 5 mistakes the others make

We’ve dealt with hundreds of tech buyers over 25 years. Apple and Oracle are head and shoulders above the rest, for the thorough, discreet, structured, and efficient way they execute a large number of deals each year.

What are the most common mistakes other large tech buyers make (repeatedly)? Our top 5 list:

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World Number One Carrier Billing Company Created

World Number One Carrier Billing Company Created

World number one carrier billing company created

We break our tradition of not publicizing our client work to congratulate the leadership of both Boku and mopay AG on today combining to create the world leader; Magister advised mopay on the transaction.  We don’t often get to work on a deal which creates a real world market leader, reaching 5 billion mobile users in 80+ countries.

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Perception minus reality equals value

Perception minus reality equals value

Perception minus reality equals value

How can a fast-growth tech company get sold for $1 billion+ before their 100th employee, or even their first $ of profit?

It’s not the thick smoke in the air in Silicon Valley.

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