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Proptech M&A is Expected to Accelerate
In a deal that Keefe, Bruyette & Woods says is a continuation of two recent themes in the proptech space, Global Payments (GPN), one of the largest transaction processors and acquirers for electronic payments, announced an agreement to acquire Zego from Vista Equity Partners. Zego provides resident experience management software and digital commerce solutions to rental property managers primarily in the U.S. The all-cash transaction values Zego at $925 million and is expected to close by the end of the second quarter.
In KBW’s view, the transaction illustrates the trends of a growing number of large technology incumbents making significant investments in proptech via acquisitions; and a broader acceleration in M&A activity across the proptech ecosystem.
Specifically, says KBW, a Stifel company, “the GPN/Zego deal adds payments technology companies to the list of recent buyers in the proptech space, which is unsurprising given the strong payments nexus in proptech.” Further, the participation of a large technology incumbent like GPN, with its $63-billion market cap, “also serves as a validation of the secular growth opportunity in the real estate technology sector.”
Year to date, KBW analysts estimate 73 global proptech M&A deals, up 46% from 50 deals over the same period a year ago. First-quarter deal activity was the highest quarterly total on record since the analysts began keping track.
In 2020, proptech deal activity remained healthy “despite a dislocation across the broader capital markets and real estate industry,” KBW says. The firm’s analysts estimate 129 global proptech deals in 2020, compared to 117-118 in 2018-2019.
Recent deal activity has been marked by large, platform-expanding deals by public real estate tech and traditional tech firms, technology-enhancing deals by traditional real estate incumbents, and accelerating activity between private players who aim to increase scale and grow their product offering.
KBW analysts expect M&A and consolidation to be an ongoing and accelerating theme for the proptech sector. So do firms in the proptech space: 48% of proptech operations now believe it’s “likely” or “very likely” that their company will be acquired, go public, or have a major liquidity event in the next three years. The percentage represents an all-time high and is up from 42% at mid-year 2020 and from 43% at year-end 2019.
