Goldman Sachs' buyout of FinTech companies

Integral service around a transaction
BY : Diego GutiérrezNovember Mon, 2018

We analyse from the point of view of corporate finance the purchase of companies or investments made by Goldman Sachs in financial technology or FinTech companies. The multinational financial company makes several acquisitions of companies and rounds throughout the year, but we are going to focus on talking about the companies that are dedicated to the development of financial technology and in which Goldman has made a move. We will first discuss the two purchases made in 2018 and then the three latest confirmed investments.

Latest acquisitions in FinTech companies

As part of its drive to upgrade the firm's technology, Goldman Sachs acquired the company in early November. ClearFactrwhich is produced by spreadsheet software and which Goldman analysts will use to build complex financial models.

"This transaction represents a tremendous validation of the core premise of the product," wrote ClearFactr CEO Dean Zarras. He founded ClearFactr in 2013 after years of working on Wall Street, where he developed applications for the fixed income, commodities, equity derivatives and energy trading markets. ClearFactr, among other techniques, uses natural language processing to allow unsophisticated users to design mini-programs. The software combines spreadsheet technology with analytics and the ability to collaborate with multiple parties.

One of the goals of the deal is to help Goldman turn all of its strategists, even those without computer science degrees, into programmers who can build customised models for IPOs and other corporate finance activities. As part of the acquisition, Zarras will join Goldman as managing director of the investment banking group.

The second acquisition by Goldman Sachs was about Finala credit card startup based in Oakland. Co-founder and CEO Aaron Frank first announced the closure of the business in early December 2017 via a blog post, but did not give a reason or disclose future plans. He and his team accepted Goldman's acquisition offer on 30 January 2018.

With Final, Goldman gains about a dozen engineers and product managers with experience in creating a consumer financial product from scratch.

Latest rounds in FinTech companies

Even Financiala financial technology startup that connects different entities in the financial services industry, raised an $18.8 million Series A round in August that included Goldman Sachs, among others. "The round is remarkable because it signifies the commitment we're seeing from the largest institutions in the country," said Phillip Rosen, co-founder and CEO of Even Financial. "This is really about the maturation of the FinTech ecosystem," he added.

Asia's FinTech scene is set to get a little bit bigger after Jumoa company that offers loans to the unbanked in Africa, unveiled plans to expand across the continent. Jumo opened an office in Singapore to lead the way and secured a massive $52 million investment led by Goldman to fuel growth.

Jumo launched in 2014 and specialises in social impact financial products, i.e. loans and savings options for those who sit outside the existing banking system and in particular for small businesses through a mobile services platform. To date, they claim to have helped nine million consumers in their six markets in Africa and have originated over $700 million in loans.

The round was endorsed by Goldman Sachs CEO Jules Frebault, who said: "There is a huge opportunity in Africa and beyond for Jumo to build on its successful track record in developing infrastructure for the digital market and to offer subscribers access to relevant financial products.

Lastly, we talked about the round received by Prodigy Finance. The UK-based business-to-business lender has secured $1 billion in debt financing, in which Goldman has participated. Prodigy Finance provides education loans to international students attending top universities around the world. With this proceeds it plans to expand its offerings to more students around the world, particularly in the engineering field and at US universities and colleges. "The world is increasingly global and connected, but the banking industry has not kept pace," said Cameron Stevens, CEO of Prodigy Finance.

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