Banks Should be Careful to Acquire Fintechs with High Valuations
The Head of Nyca Partners, a NYC based venture capital firm, says banks need to be careful to not acquire what could be an overvalued fintech firm; “Goodwill is a 100% deduction at a bank,” Hans Morris said to American Banker. “If you buy a company for a billion dollars, your tangible common equity is reduced by a billion dollars. If that company only earns $15 million, then that’s a really dumb decision.”; a good example of what can be a worthwhile acquisition is JPMorgan Chase’s purchase of InstaMed which was a specific vertical and key area for the bank, it made sense from a price standpoint in relation to the bank’s market cap. Source.