Mergers and Acquisitions (M&A)

Mergers and Acquisitions (M&A) are transactions that transfer ownership of companies, business units or assets, or combine them. In an acquisition one company buys control of another; in a merger two combine into one, though most so-called mergers are acquisitions in legal form, paid in cash, shares or both. Deals are horizontal, vertical, conglomerate or acqui-hires, and structured as share or asset purchases. A sale typically runs from information memorandum and NDAs through a letter of intent, due diligence and the share purchase agreement to completion, often with earn-outs or escrow. Licensed fintech deals are share deals because a licence stays with its legal entity, and buyers crossing 10% must notify the regulator in advance.

21 November 20252 min read

Mergers and Acquisitions (M&A) are transactions that transfer ownership of companies, business units or assets, or combine them. In an acquisition one company buys control of another; in a merger two combine into one, though most so-called mergers are acquisitions in legal form, paid in cash, shares or both. Deals are horizontal, vertical, conglomerate or acqui-hires, and structured as share or asset purchases. A sale typically runs from information memorandum and NDAs through a letter of intent, due diligence and the share purchase agreement to completion, often with earn-outs or escrow. Licensed fintech deals are share deals because a licence stays with its legal entity, and buyers crossing 10% must notify the regulator in advance.

Merger vs acquisition: the main deal types

Deals are classified by the relationship between buyer and target. A horizontal acquisition buys a competitor to add customers or market share. A vertical acquisition buys a supplier or channel, such as a payments app buying its processor. A conglomerate deal buys an unrelated business, and an acqui-hire buys mainly the team. Legally, the buyer either acquires the target's shares, taking all its assets, contracts and liabilities, or buys selected assets and leaves the rest with the seller.

How does the M&A process work

A typical sale moves through an information memorandum, non-disclosure agreements with interested buyers, indicative offers, a letter of intent with exclusivity, due diligence, negotiation of the share purchase agreement, signing and completion. Price is usually agreed on a cash-free, debt-free basis and adjusted at completion for working capital. Part of it is often deferred through an earn-out tied to future performance or held in escrow against warranty claims.

Why fintech M&A runs on share deals

A financial licence generally cannot be sold separately from the company that holds it, because the regulator granted it to that legal entity after assessing its owners, managers and controls. Buying a licensed EMI, payment institution or bank therefore means buying its shares, and the regulator assesses the buyer first. Under EU rules (CRD Article 22 for banks, PSD2 Article 6 for payment institutions), anyone acquiring a qualifying holding of 10% or more, or crossing 20%, 30% or 50% of capital or voting rights, must notify the regulator in advance. For banks, the regulator then has up to 60 working days from acknowledging the notice to decide, a clock that pauses while it requests more information. In the UK, the regulator has 60 working days from acknowledging a change-in-control notice.

Illustrative example: a buyer agrees to acquire 100% of an EMI for €2.5 million. The EMI must hold at least €350,000 of initial capital under the E-Money Directive, so the buyer prices that capital as cash locked inside the company, and makes completion conditional on regulatory approval. With information requests, the gap between signing and completion often runs past three months.

What buyers and sellers focus on

In licensed fintech deals, value depends less on revenue multiples than on the condition of the licence: which permissions and passports are active, whether there are open regulatory findings, how safeguarding and AML controls performed in recent audits, and whether the approved directors and compliance officers will stay. A licence with live banking and card scheme relationships is worth more than a dormant one, because a dormant entity often needs new banking partners before it can process a single payment.

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