Tech sector’s broad slowdown gives investors pause, but M&A and PE activity expected to continue in H2’22, according to KPMG
TORONTO, 8 September 2022 /CNW/ – After a record year in 2021, investment in Canadian fintech fell more than 50 percent in the first six months of 2022, reflecting a broader slowdown in the technology sector, according to KPMG’s Pulse of Fintech H1’22 Global Report.
Canadian fintech companies saw 810 million dollars in total investment spread over 85 agreements in the first half of 2022, down from 1.9 billion dollars in the second half of 2021. There was also a marked drop compared to the first half of 2021, which saw 5.4 billion dollars in investment across 108 agreements. However, the first half of 2021 was an outlier, with one of the strongest quarters on record.
“The market downturn and subsequent lower tech valuations caused investors to hit the ‘pause button’ over the past few months, but with so much investment pouring into fintech last year, we see it as a rebalancing of expectations, or a sector reset. if you will,” says Geoff RushNational industry leader for financial services in KPMG i Canada. “We expect fintech to continue to attract interest in the second half of the year, but investors will be more selective about where they spend capital.”
The majority of fintech investments in Canada in the first half of the year came from venture capital. Broken down by deal type, 25 were seed-round investments, 23 were early and 17 were later-stage financing rounds.
More than a third of all fintech deals occurred in the cryptoasset space, despite a slowdown in that market.
Investments in Canadian fintech were total 426.6 million dollars in Q1 and 382.4 million dollars in Q2
85 fintech deals in total (includes venture capital, M&A and private equity)
69 venture capital deals worth USD 776.12 million
29 deals in the crypto-asset space, eight deals in payments, eight in RegTech, five in PropTech
No initial public offering i Canada
Global investments in fintech declined 111.2 billion dollars across 3,372 agreements in H2’21 to 107.8 billion dollars of 2,980 agreements in H1’22
America saw fintech investment fall off 59.7 billion dollars to 39.4 billion dollars
KPMG’s global report also notes that the turmoil in the public markets “almost disrupted IPO activity,” and that includes Canada, where there were no IPOs in the first six months of the year. The lack of IPOs is expected to continue into the second half of the year.
While overall investment in fintech is expected to moderate over the next six months both globally and within Canadacontinued downward pressure on technology valuations could result in more merger and acquisition (M&A) and private equity activity, as investors and companies look for bargains, the report notes.
“The innovation that comes out of Canada’s the fintech space and the digital opportunity it brings to the financial services ecosystem Canada an attractive location for fintech investment and I believe we will continue to see growth in areas such as payments, reg tech and crypto, despite the upheaval in cryptoassets and the wider technology sector,” said Rajeev Shankar, Partner Finance Transformation & Financial Services at KPMG in Canada.
“We are also seeing investment in fintech companies based in places like Charlottetown, Medicine hat and Quebec Cityso that tells me that Canada’s The fintech ecosystem will continue to evolve and diversify, both in terms of the types of fintech emerging, the services they offer, and even where they thrive,” he added.
About KPMG i Canada
KPMG LLP (Canada), a limited liability partnership, is a full-service audit, tax and advisory firm owned and operated by Canadians. For over 150 years, our professionals have provided consulting, accounting, audit and tax services to Canadians, inspiring confidence, empowering change and fostering innovation. Guided by our core values of Integrity, Excellence, Courage, Together, For Better, KPMG employs more than 10,000 people in over 40 locations across Canada, serves private and public customers. KPMG is consistently ranked as one of the Canada’s top employers and one of the best places to work in the country.
The company is established in accordance with the laws of Ontario and is a member of KPMG’s global organization of independent member firms affiliated with KPMG International, a private English company limited by guarantee. Each KPMG firm is a legally distinct and separate entity and describes itself as such. For more information, see home.kpmg/ca.
SOURCE KPMG LLP
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