The FinTech, or Financial Technology, industry is exploding. According to CB Insights, FinTech startups received $17.4 billion dollars in funding in 2016 and the acquisition of FinTech companies by banks has accelerated rapidly. What is FinTech? – it is basically a marriage of technology and finance. FinTech companies provide a broad spectrum of technological innovation in personal and commercial finance. FinTech services include digital currency, mobile payments, online payment services, crowdfunding and robo-advisors, among many other services. The nature of a FinTech company’s services calls into play many due diligence concerns that a purchaser of a FinTech company must address, some of which do not exist in an ordinary M&A deal. For example, many federal regulatory agencies oversee the activities of financial institutions. That oversight applies to FinTech companies providing marketplace lending platforms. Federal and state agencies also oversee and require licenses for money transmission, which many FinTech companies provide services for. Privacy laws must be considered since FinTech companies obtain personal information from the users of their services. Certain very common due diligence areas need heightened attention when the seller is a FinTech company. For example, intellectual property matters must be scrutinized to make sure that the developers of the technology have transferred their inventions to the seller. As the reach of FinTech expands exponentially, it is important to determine in an acquisition whether the FinTech target is in compliance with the myriad of laws applicable to it.
ABOUT GLENN D. SOLOMON
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Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.
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