Within the alternative finance and marketplace lending fintech sector we’ve seen plenty of deals. They include closing of investment rounds, IPOs and partnerships. What has been missing though has been mergers and acquisitions (M&A). However, that may change as the industry is growing rapidly, and more information about customer interests and how marketplace works best are emerging. As such, we may soon see an increase of deals by alternative finance providers who are able to leverage their strengths by merging.
Fitting this potential trend is an announcement that Singapore-based ApexPeak is acquiring ASYX of Netherlands for an undisclosed amount. Between the two firms, they are carving out a niche of supplying capital to small and medium size businesses (SME) in emerging markets. Servicing customers in twelve countries, ASYX has offices in both the Netherlands and Indonesia. For its part, ApexPeak has been servicing the Asian and African markets from offices in Singapore and South Africa.
Like many other marketplace lenders who focus on a specific niche, ApexPeak specializes in working capital loans, where they provide short-term financing to SMEs for such items as inventory purchases. Focusing on SMEs, ApexPeak targets customers who have immediate needs for funding, but either are rejected by banks, or face higher costs when borrowing from them.
We see more M&A activity in the e-procurement space, as well as in marketplace lending – Gakim Solomons
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Connecting with Gakim Solomons, President and CEO of ApexPeak, stated to Finance Magnates, “Our typical customer for receivables financing are generally mid-market, high growth SMEs who are unbanked, meaning they are unable to get access to traditional bank funding as they do not meet certain criteria”. However, Solomons explained that despite being rejected by banks, ApexPeak’s typical SME customers are established entities.
In regards to why ApexPeak has decided to grow through acquisition versus organic expansion, since they are already doing business in multiple countries, Solomons answered, “The acquisition of ASXY is a technology play that will substantially bolster our tech capabilities — and it’s sometimes faster to acquire than to build. The timing, price, team, and vision were the right fit, and so we took advantage of this opportunity.”
Overall, when asked whether he foresees more consolidation in the alternative finance industry taking place, Solomons answered “Yes”, adding, “We see more M&A activity in the e-procurement space, as well as in marketplace lending – which should see more consolidation due to the emergence of more verticals. Moreover, banks might be more open to strategically partnering with FinTech companies as a defensive move, in turn driving the number of M&As.”
In relation to banks, they have shown to be frenemies with marketplace lending. On one hand, they are at risk of being disrupted by alternative finance operators. But, on the other hand, banks have also formed partnerships with marketplace lenders to refer customers, as well as supplying capital on P2P lending platforms. On this dual aspect, Solomons explained, “Banks can and do lend directly to SME borrowers. However, a) not all borrowers want to do business with banks, and b) they might not be able to qualify for a traditional business loan with a bank. FinTech companies like ApexPeak allow banks to test news ways of doing things; to run proof of concept pilots were they can innovate and learn what works and what doesn’t.”