The current economic climate is shaking up the global M&A and PE market. Tanguy Lesselin, co-founder and CEO of M&A tech startup Finquest, explains how companies like his are benefiting.
Interest rates and the war in Ukraine are driving up the cost of capital, causing global volumes to decline by 4% during the first half of 2023. Despite this trend, Luxembourg M&A tech firm Finquest is growing, “a sign that the market is looking for a different way of doing things. A way that is more about finding the assets that others don’t,” says Finquest CEO Tanguy Lesselin.
The founder reckons that flush private equity players are shifting their focus to smaller targets through bolt-on acquisitions and consolidation because they are cheaper than larger, intermediated M&A targets. The trouble is, he says: “It’s very difficult to find smaller companies […] Our data shows that 40% of companies between $5m and $100m in revenue are barely approached by investors or corporates. It is not that these companies are less interesting, just that they are not found through the usuals channels, whether databases or bankers. By missing them, a lot of opportunities are left on the table.”
Since it was founded in 2016, Finquest has sought to offer a solution to this challenge, by leveraging an AI-augmented database of private companies to identify and connect middle and large acquisition targets with private equity and corporates.
“Funds being raised in the middle market are actually doing well so from a fundraising perspective”
Tanguy Lesselin, CEO of Finquest
“We now cover 178 million companies,” Lesselin says, a figure that has almost doubled over the last 12 months. And today eight out of the top ten performing private equity firms use the Finquest service.
Finquest boasts a 250-strong team, spread across nine offices, with 50 people dedicated to working on the data and human-assisted machine learning algorithm moderation.
“This is new compared to last year when we would train our algorithms with pre-existing data. Now we’ve reached a stage where we needed to enhance the algorithms with our own resources,” says Lesselin.
Eighteen months after opening offices in the US, half of its revenue now comes from North America.
“We’re making very significant progress there, which is very exciting, because we do want to be a global brand. And now we start to be recognised as the leader in Europe and we want to do the same thing in the US.”
In 2022, Finquest received a significant capital boost when Belgian VC firm Capricorn led a $5.5 USD round.
Looking to the future, the CEO was confident that the M&A market would bounce back. “Funds being raised in the middle market are actually doing well so from a fundraising perspective, there is more capital to be deployed and more money to come in the future for M&A,” he concluded.
