How to Identify the Right Bolt-on Acquisition Target for Your Financial Technology & Services Company

As a CEO or business owner in the financial technology and services sectors, scaling your company often hinges on identifying strategic acquisitions. But what does it take to find the right target, one that not only fits your business goals but accelerates growth sustainably?

Acquisitions are much more than simply adding revenue streams or EBITDA; they are about choosing the right partner that complements your business, strengthens your market position, and drives value. This guide will walk you through the key criteria for making successful acquisitions that fuel long-term success, from financial health to cultural alignment.

Key Criteria for Identifying the Right Acquisition Target

1. Alignment with Your Growth Strategy

Before identifying acquisition targets, it's essential to define your strategic vision. Ask yourself:

Are you aiming to expand into new regions or consolidate your existing market share?
Do you require specific expertise or technology to enhance your service offering?
Are you looking to identify talented leaders, developers and operators to help run your business?
Will an acquisition streamline your operations and drive efficiencies?

By setting clear growth objectives, you’ll sharpen your focus on the targets that truly align with your long-term vision, ensuring those opportunities move the needle in the right direction.

2. Financial Health & Profitability

Strong financial performance is non-negotiable, but smart acquisition decisions are based on a deeper understanding of the numbers. Look beyond top-line revenue and EBITDA, here are some of the most important considerations:

Revenue growth trajectory: Is the company in an upward growth phase, stable, or facing decline?
Is the target company generating the right kind of revenue? Is it well diversified across different clients and industries, recurring, and predictable? Or is it lumpy, one-off in nature and not visible beyond the current financial period?
EBITDA margins: Do they align with or outperform industry benchmarks? This should give you a good handle on how good an operator the CEO and management team is.
Pricing: Where in the market does the company operate? Does it sell a premium product in the market? Does it sell loss-leader products to upsell other services?
Debt structure: What liabilities or contingent liabilities exist, and how do they impact the value of the business?

Thorough financial due diligence ensures that you will be forewarned about whether an acquisition would likely strengthen your balance sheet or complicate it.

3. Regulatory & Compliance Considerations

The regulatory environment is one of the most complex factors when considering acquisitions, particularly in the financial technology and services sectors.

No piece of EU legislation covers all aspects of financial technology. Financial technology companies providing financial services (e.g. lending, financial advice, insurance, payments), must comply with the same laws as any other firms offering those services. Therefore, different laws apply depending on the activity (e.g. payment services, crowdfunding), such as Directive 2000/31/EC (e-commerce), Directive 2002/65/EC (distance marketing of consumer financial services), Directive 2009/110/EC (electronic money), and Directive (EU) 2015/2366 (payment services).

There are also significant protections in place from a data and consumer protection perspective which are governed by the Directive 95/46/EC that need to be adhered to by financial technology and services firms operating in the European Union.

Here are the key questions to ask when considering whether to acquire a financial technology and services company operating in the European Union:

Does the target company comply with all necessary industry regulations?
Are there any pending legal or compliance issues that could delay or derail the process?
What will the integration of compliance frameworks look like post-acquisition? What, if any, hidden liabilities exist when taking this integration into account?

By proactively engaging a solicitor firm with extensive experience in the financial technology and services industry, you can minimise regulatory risks that may jeopardise your acquisition's success.

4. Technology & Digital Capabilities

In today’s landscape, technology is often the differentiator, this is particularly the case in the financial technology and services sectors. At the initial stages of considering acquiring a financial technology or services company, here are some technology and digital capability considerations:

Does the company offer proprietary technology or innovative solutions that could complement or enhance your existing capabilities? Does the company own the intellectual property attached to that proprietary technology? Or does the company merely license or white label another company’s technology for use?
Does the company have any patents?
Is there any technical debt within the company? The best way to consider this is to conduct a survey of the target company’s clients and to review a product’s downtime logs to ascertain the “MTTR” (Mean Time to Recovery - i.e. the amount of downtime experienced by the company’s technology products over time)
Is their technology infrastructure scalable and compatible with your systems?
How is the company’s software development team structured? Are there solid technically sound senior software engineers in place or are there any gaps within the team? Do they have the requisite knowledge and experience within the financial technology and services industry?
What measures are in place to safeguard against cyber threats and protect data?

Acquiring a technology-rich business can provide a significant competitive edge, making it imperative to assess their digital capabilities carefully. We strongly recommend enlisting the services of experienced technology professional services providers to carry out an in-depth technology due diligence engagement.

Beyond evaluating a company’s existing technology and infrastructure, it’s also essential to consider that technological advancements are transforming financial technology and services, making innovation a critical factor in acquisitions. Key areas to assess include:

AI & Machine Learning – Enhances risk assessment, fraud detection, and customer personalization
Blockchain & DeFi – Strengthens transaction security and enables digital identity verification.
Embedded Finance & APIs – Drives seamless financial integrations and revenue diversification.
Cloud & Cybersecurity – Ensures scalability and robust data protection.

Understanding a target’s adoption of these technologies is crucial for assessing long-term value and competitive advantage.

5. Cultural Fit, Leadership, & Talent Integration

Cultural alignment can be a defining factor in the success or failure of an acquisition. Integrating teams and leadership is just as crucial as managing technology, financials, and regulatory compliance. Throughout the acquisition process, consider the following:

Does the target company’s leadership team align with your company’s values and long-term vision? How do they reinforce these values within their organisation?
How will decision-making processes and company culture integrate post-acquisition? Are there potential areas of friction or misalignment?
Who are the cultural and operational linchpins of the company? Are there individuals beyond executives, such as top-performing employees or influential team members, who should be retained to ensure a smooth transition?
Will key executives or founders remain? If so, for how long, and under what incentives? How will their presence (or absence) impact employee morale and cultural continuity?
How do the two companies compare in terms of work environment, collaboration style, and employee expectations? Are there differences in remote work policies, management styles, or team structures that need alignment?

Cultural integration should be approached with the same level of care as financial, technical, and regulatory considerations. A well-managed transition helps minimise operational disruptions and prevents potential conflicts that could hinder long-term success.

Executing a Successful Acquisition

Once the right M&A target is identified, executing the deal requires precision. Here’s how to maximise the chances of success:

Conduct In-Depth Due Diligence – A comprehensive approach to financial, legal, technical, regulatory and operational due diligence will uncover potential risks early.
Negotiate the Right Deal Structure – A well-structured deal can optimise tax efficiency, reduce risk, and align incentives for all parties.
Develop a Robust Integration Plan – A clear, actionable post-acquisition integration plan ensures that synergies are realised and value is unlocked.
Engage the Right Advisors – M&A specialists, financial advisors, technical, compliance and legal experts bring crucial insights and help mitigate risk throughout the process.

How Vico Advisory Can Help

At Vico Advisory, we specialise in guiding financial technology and services companies through every stage of the acquisition process. Our deep expertise, knowledge and credentials in both Sell-Side & Buy-Side M&A, Financial Due Diligence, and Post-M&A Deal Integration ensures that you make strategic, informed decisions that align with your growth objectives.

If you’re considering an acquisition, let’s talk. We can help you identify the right opportunities and navigate the complexities to ensure your acquisition drives long-term value.

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