Financial software provider Intuit, maker of Quickbooks, TurboTax, and Mint, is to acquire Silicon Valley credit score management startup Credit Karma for an estimated $7 billion in cash and stock, according to a report in the Wall Street Journal.
The deal, which has yet to be finalised, shows that startups in the FinTech space may be looking to capitalise on rapid consolidation in the sector rather than go for IPO.
In January, payments giant Visa acquired Plaid, another FinTech that is focused on consumers’ financial data. That $5.3 billion deal was again taken in preference to market flotation by the startup.
Credit Karma was co-founded in 2007 by CEO Kenneth Lin to allow consumers to manage their credit scores for free – a move that changed the market by replacing paid-for services with deals based on consumer data.
Earlier this month, the startup overhauled its product portfolio. Recently, it began offering a service that pitched it against Intuit’s TurboTax application, which may have influenced the deal.
The Intuit purchase – if finalised and approved – will create an attractive portal for financial services providers to advertise their offerings to customers, who are able to use the platform for free.
The deal is merely the latest in this rapidly evolving sector. Earlier this month, Morgan Stanley acquired discount broker E-Trade for $13 billion. Meanwhile, online loan platform LendingClub announced the acquisition of branchless bank Radius – the first example of a FinTech buying a bank.
- As previously reported on Transform Finance, 2019 saw record levels of mergers and acquisitions in the FinTech sector, according to a report from Hampleton Partners. Transaction volume in the second half of 2019 hit a three-year high of over $130 billion.
Four huge MA deals set the record for the largest transactions ever recorded in the sector: Fidelity’s purchase of Worldpay ($44 billion); Fiserv’s acquisition of First Data ($22 billion); the merger of Global Payments with Total System Services ($21 billion); and the London Stock Exchange Group’s acquisition of Refinitiv ($14 billion).
These deals, collectively worth $101 billion, were “testament to the readiness of large players to stay relevant while sustaining strong revenue growth”, said the report.