Crossfin Tech being acquired for R1.5 billion, one of the largest private equity-led deals in the local fintech sector

CROSSFIN Technology Holdings, a leading fintech company, is being acquired for R1.5 billion by a consortium led by Ethos’ Mid-Market Fund I (EMMF) and which includes Crossfin’s founding management team, Ethos Artificial Intelligence Fun, and empowerment investor African Rainbow Capital (ARC).

The transaction, one of the largest private equity-led deals in the local fintech sector to date, would offer the consortium exposure to an industry that was expected to continue to benefit from the trends of digitalisation and proliferation of payments technologies, a statement said yesterday.

The transaction would also provide the company with capital to pursue acquisitions and growth opportunities.

EMMF managing partner Edward Pitsi said, “This is an exciting opportunity underpinned by strong tailwinds in a cutting-edge industry. Crossfin is ideally positioned to continue capturing the payments technology and the broader fintech opportunity both existing and emerging.” The transaction sees the exit of founding investors Capital Eye Investments and the Multiply Group, that had been anchor shareholders since 2017.

Its co-founding management team has led the business since inception. Crossfin’s business model had allowed it “to consistently achieve robust top line and earnings growth, and a top quartile Gross Internal Rate of Return to shareholders, despite limited access to capital to support growth,” the company said. The performance of the business was during a challenging economic environment and in spite of the impact of the Covid-19 pandemic and associated lockdown measures implemented in South Africa in 2020/2021.

Crossfin has three main pillars. Its main payment technology investment is in Adumo, the leading independent omnichannel payment acquiring business in South Africa processing 200 million payment transactions annually across 50 000 active merchants through its various payment platforms.

Adumo is also strong in the informal economy through its subsidiary iKhokha, a market segment estimated to be in excess of 1 million merchants where cash payments still constitute the overwhelming majority of payment transactions, and where strong growth in non-cash payments was being experienced and was expected to accelerate.

The payment technology segment also includes Crossgate Holdings, which issues cards for retailers, banks, and nonbank financial institutions.

Crossfin is also invested in Retail Capital, which uses transactional data to provide funding to SMMEs, a segment that is under-penetrated by conventional financial institutions and where a significant funding gap exists. Crossfin Ventures, the venture capital arm, allows the company to gain early-stage exposure to emerging trends in the fintech industry. Crossfin is also in the process of acquiring Sybrin, a low code and artificial intelligence (AI) enabled enterprise software business targeting the financial sector with a focus on automation and the use of AI and machine learning to achieve efficiencies for its clients.

ARC deal executive Charmaine Padayachy said Crossfin had a capable management team “that we are confident will continue to add significant value to what is already an impressive track record”.

Crossfin chief executive Dean Sparrow and CXO Anton Gaylard said: “As management we see significant growth underpinned by secular tailwinds in the payments, smart funding and broader fintech industry, which has seen us effectively reinvest 100 percent of the proceeds from the sale of our stake back into the business.”

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