Riding on the FinTech Wave: Disruption and Value Creation in Corporate Takeovers

Abstract

FinTech companies and FinTech mergers are increasingly prevalent over the recent decades. This paper explores the motives and consequences of FinTech adoption through corporate takeovers. Acquiring firms experience FinTech disruptions in the post-merger period. FinTech firms become highly sought-after in mergers and acquisitions (M&As). We find significant value-creation of FinTech mergers in both short-term and long-term, especially when acquirers ex-ante conduct FinTech-related businesses. Specifically, FinTech mergers increase the valuation of combined firms by 2.2% around the deal announcements, and such value creation is more pronounced than non-FinTech mergers. Moreover, FinTech mergers generate positive spillover effects on target peers, including favorable market reactions to the industry peers in the short term and FinTech merger waves in the long term.

Keywords: FinTech, Mergers and acquisitions, Value creation, Industry peers, Merger waves, FinTech Disruption

JEL Classification: G10, G14, G30, G34