M&A
Mergers and acquisitions (M&A) are the transactions in which companies combine — a merger — or one buys control of another — an acquisition — through the purchase of shares or assets, for cash, shares or both, negotiated between the parties or, for public companies, through offers to shareholders. Companies do them to grow faster than they can organically, to buy capabilities, customers or licences, to consolidate an industry, or to sell what they no longer want.
- Also known as
- Mergers and acquisitions, Mergers & acquisitions, M&A transactions, Deals
- Used at
- every industry; in the site's field, fintech and payments (the 2019 consolidation wave, its 2023–2025 unwinding, the neobank and BaaS deals) and AI (the 2024–2025 licence-and-hire transactions, the infrastructure and application acquisitions) — sectors where the licence, the data and the talent are what is bought
- Binding
- company law on how control transfers; securities and takeover rules for public targets (the UK Takeover Code, US tender-offer rules); merger control (EU, UK CMA, US HSR and the agencies) for deals above thresholds; sector approval for regulated targets (a change of control of a licensed fintech needs the regulator's consent); and the contracts — the purchase agreement, disclosure letter, warranties, escrow — that allocate the risk
- Typical process
- preparation (advisers, valuation, data room, teaser and information memorandum); marketing to buyers; indicative offers; diligence by the shortlisted; binding offers and negotiation; signing; conditions (regulatory, antitrust, consents); closing; integration. Four to nine months for a private company; longer with approvals
- Typical numbers
- global M&A of $3–4 trillion a year across 40,000–50,000 deals; fintech M&A of tens of billions a year; most private deals below $100 million; the price set by multiples of earnings or revenue, precedent deals, and the buyer's synergy case; a quarter to a half of acquisitions judged afterwards not to have created value for the buyer
- Parties
- buyer and seller, their boards and shareholders; advisers (bankers, lawyers, accountants, diligence providers); regulators; lenders financing the buyer; and the management and employees whose future the deal decides
How M&A works in practice
A payments company's founders decide to sell. Their adviser values the business, prepares a teaser and an information memorandum, opens a data room, and approaches forty potential buyers — strategics who want the product or the customers, consolidators who want the volume, sponsors who want the cash flow. Ten sign NDAs; six submit indicative offers with a price range and structure; three are admitted to diligence, where their lawyers, accountants and specialists read the licence file, the financials, the contracts and the technology; two submit binding offers; one is chosen, and the purchase agreement is negotiated: price and adjustments, warranties, indemnities, escrow, conditions. Signing; five months of regulatory approval; closing; and the buyer's integration plan, which decides whether the price was right.
The pattern varies with the deal. A public target is approached through the board or, if hostile, directly through shareholders under the takeover rules. A distressed seller sells fast, through insolvency procedures. A licence-and-hire AI deal buys the team and a licence to the technology without the company. A merger of equals combines through a share exchange with no cash. What is constant is where value is made and lost: in the preparation (a clean licence file, a defensible earnings figure, a data room that answers questions before they are asked) and in the integration (customers kept, systems migrated, people retained). Diligence finds the problems; the price, the structure and the warranties allocate them; and the deals that failed usually failed on the integration or on a synergy case nobody tested.
For a fintech founder, M&A is the most likely exit and the one whose outcome depends on years of preparation; for a buyer in fintech or AI, it is the way to acquire in months what would take years to build, at a price that includes the risk of being wrong.
Example
A bank decides to buy a small-business lending fintech rather than build one. The target has €60 million of loans, a lending licence, a credit model and 11,000 customers; the bank has capital, deposits and 2 million SME clients. Offer: €95 million, 3.2× revenue, on the case that the bank's distribution triples the loan book in three years at the bank's cost of funds. Diligence finds the credit model's out-of-time performance weaker than presented and the licence subject to an open regulatory query; the price becomes €82 million with €12 million in escrow against the query's outcome. Approval takes six months. Integration keeps the fintech's platform and brand and routes the bank's clients to it; at year three the book is €155 million — below the case's €180 million, above the bank's build alternative, and the escrow is released in full after the regulator closes the query.
Common mistakes
- Going to market unprepared; the questions diligence asks are known in advance. - A synergy case nobody tested against what the target's customers will do. - Underestimating regulatory approval time for a licensed target. - Signing without a plan for the first hundred days after closing. - Reading a failed acquisition as bad luck rather than a price paid for an untested case.