One of the few benefits of rising interest rates, tighter monetary policy and a slowing economy, is that these tougher conditions have encouraged industries to consolidate. Or in other words, finally allow the ‘strong to get stronger’.
Meaning leading businesses - with the best services, balance sheets and management teams - are now beginning to hoover up quality assets at attractive prices.
This is exactly the case in the #fintech space, where today B2B international epayments platform Equals EQLS announced that it plans to acquire Roqqett Ltd (a mini Paypal with cutting edge B2C epayments technology) for £2.25m (split £1m upfront + £1.25m deferred) subject to FCA regulatory approval.
CEO Ian Strafford-Taylor, commenting: "The platform, underlying technology, and licences that we are acquiring fit well with our stated strategy of providing payments solutions to our B2B customer base. The ability to provide our corporate customers with an alternative route to acquire payments from their B2B or B2C customers is the last piece of the jigsaw in terms of Equals participation in the full payment lifecycle. This Acquisition allows us to fast-track this capability which in turn will widen our addressable markets for our services and ultimately drive growth."
View from Vox
This bolt-on deal is a perfect fit, whereby both firms can leverage each other’s best-in-class platforms across their existing clients.
Not only increasing the ‘share of wallet’, but also generating significant economies of scale, adding instant B2C epayments capability to the enlarged group and importantly further building barriers to entry vs rivals.
Sure Roqqett may be loss making. Yet equally it also owns 2 valuable open banking licences that will complete #EQLS’ end-to-end B2B2B/C capability.
All in all, an incredibly smart move despite the transaction being earnings dilutive short term.
In terms of valuation, I make no change to my 152p/share fair value & look forward in hearing how the integration progresses at the next trading update - probably in early January.