The Flexpoint Ford deal looks good, but there are some things to keep an eye on
Baker Hill, a provider of cloud-based, end-to-end loan origination, risk management and analytics software, recently announced that Flexpoint Ford, a private equity firm specializing in investments in the financial services and healthcare industries, agreed to acquire the company.
The announcement is a #GonzoBanker #Fintech Deal to Watch for a few reasons:
- Money is still flowing in this fintech market, but it’s increasingly focused where there is real use case value for financial institutions that pay real money for real solutions to help real clients that generate real earnings. It’s what one of my Fintech Hustle podcast guests (serial fintech entrepreneur Tom Shen) referred to as “meat and potatoes” fintech.
- The deal doesn’t look like a market share or product roll-up acquisition grab. Rather, it appears to be strong, forward growth ambition from the new owner to expand. So, more likely net new value creation and less likely any kind of rent extraction.
- Deep expertise in sound business lending has value, which showed up in the market both directly helping community banks and through partnerships. As an industry observer, the relationship Baker Hill built up with Fiserv over the last several years really had my attention because I saw the mutual need and benefit. Two talent resources the industry needs more of are in integration and partnership execution. Viva Las Integradoras! Long live the integrators!
- Tying together streamlined credit processes with data is timeless, but even more urgent during times when credit quality garners more scrutiny and businesses and consumers expect better, faster service on loans.
For the hundreds of Baker Hill clients and prospects in the U.S. midsize bank market, this Flexpoint Ford deal looks good, but there are always some things to keep an eye on, including:
- Culture Club: Keep an eye on the talent, especially the lending subject matter expertise, software developers and integrators. Many times, we’ve seen ownership changes result in key team changes.
- Roadmapus Interruptus: While this transaction appears growth-ambitious, with all acquisitions it’s a good idea to watch the product roadmap execution to ensure developments aren’t getting sacrificed in an earnings squeeze. After years of neglect under Experian’s ownership, the platform had significant gaps to address at the time The Riverside Company purchased Baker Hill. The efforts over the past eight years have put the platform on the right trajectory but the roadmap will be critical. The good news here is that recent PE investments like Meridianlink and Abrigo appear to have worked out favorably on their product developments. Expect more transactions as the loan origination space is spirited right now with Reuters reporting nCino exploring acquisition suitors as well.
Terms of the Baker Hill deal weren’t disclosed, and the announcement is subject to regulatory approvals, but shout out to the teams at Riverside, Flexpoint Ford and Baker Hill, including John Deignan, Todd Juracek, David Catalano, Anna O’Nan and Mike Horrocks.
Thanks to my Cornerstone cohorts Daryl Jones and Joel Pruis for their contributions to this post.
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Sam Kilmer is a managing director in Cornerstone Advisors’ Research & Fintech Advisory Practice. He produces the Fintech Hustle podcast. Follow Sam on LinkedIn.