Presently buyers really see the value in controlling the Digital Flow of Currency for all companies. This value that they saw resulted in over $20B in megadeals in 2017. In the Digital Currency space, many of the deals are being completed by PEs. This fact has driven a need for deal flow to be bolt-ons for existing platform and looking to fill gaps in technology, clients or expanding into adjacent markets.
Digital Currency Flow is a trend that isn’t just touching a single sector of the tech space. Instead, it’s touched almost every single one. Companies with digital currency flow control in their technology stack are more likely to have higher multiples than counterparts that don’t.
There has been a particular trend with payments happening through mobile devices. In the US market, there was $134M worth of transactions last year. While in China, they totaled over $9T. The mobile payment process is rapidly growing in the world at large, but we see that most of the mobile payments are currently happening in China. Many other companies are replicating the methods being used there such as QR codes and stronger back-end integration for other services beyond just payment processing. In China, they are leveraging the data analytics surrounding each transaction and giving users significantly greater value-added services than traditional banking has offered thus far.
In the discussion about Digital Currency Flow, considerable attention should be spent on the blockchain, distributed ledger and cryptocurrency space. There is significant activity in the cryptocurrency market thanks to how much VC investment has been made. Despite the interest that people have in cryptocurrencies, banks worldwide are changing whether or not they accept the currency; these changes are even happening daily. Recently the US Federal Reserve Board published a report on payments, clearances and settlements. According to the report, there are six hundred million financial transactions happening daily with $12.6T (Yes, trillion) processed. They estimate that blockchain can reduce the costs of daily transactions by 20-25%. This may be a reason for companies to look into blockchain as part of their digital currency flow control.
With the increased VC, PE and strategic buyer activity in the Digital Currency Flow trend, every company who impacts the flow of currency should be highly incentivized to calibrate to the existing activity and be on the lookout for the highest valuations in many years!
But there are other trends that you can capitalize on to get a high valuation in tech M&A. If you want to know more about the trends that Corum has identified for 2018, then listen to the Forecast 2018 from January. If you don’t want to listen to everything about 2018, then take a look at the other posts that we have about the other nine trends that were on our list this year.