Shortly after being excluded from the acquisition of Orange Bank in December 2023, Ripplewood Investment Fund, through its SPAC Iris Financial, set its sights on Younited, a French fintech specializing in consumer credit, with an acquisition offer for the unicorn.
While both parties have communicated an optimistic outlook on the deal, presented as an IPO for Younited, it is primarily a major setback for historical shareholders, who are likely to experience significant dilution due to this acquisition, marked by a substantial discount.
Optimistic Communication, Complex Reality
Iris Financial officially announced the acquisition of Younited via a press release. The transaction, portrayed as an opportunity to strengthen the fintech’s funding capabilities, will result in Younited transforming into a publicly listed company under the name Younited Financial on Euronext Amsterdam and Euronext Paris.
The acquisition by Iris Financial is structured as an indirect IPO via a SPAC, a listing vehicle often used to accelerate fundraising and public offering processes while offering favorable conditions for the buyer.
Iris Financial will inject between €150 million and €200 million into Younited in exchange for new shares. This will allow Younited to strengthen its equity base and continue its international expansion, particularly in its core markets (France, Italy, Spain, Portugal) and new projects across Europe.
However, behind the scenes, this transaction leads to significant dilution for historical shareholders. In 2022, Younited raised €60 million at a valuation of €1.1 billion, making it one of the French unicorns in the fintech sector. But today, with a valuation that could be cut by more than half, the founders and historical investors are seeing their shares significantly devalued.
By analyzing the financial details of this transaction, we observe a steep discount, with a valuation potentially revised to around €469 million.
After the transaction, Younited’s shareholders expect to hold 60% of the capital in the new entity, while Iris Financial shareholders will hold 40%, contingent on a minimum contribution of €150 million. This means the 60% owned by existing shareholders is valued at €225 million. This gives a post-money valuation of €375 million, increasing to €468.75 million if the maximum capital injection of €200 million is made.
With such a valuation, Younited’s historical shareholders, including prestigious investors like Eurazeo, Bpifrance, and AG2R La Mondiale, would see the value of their holdings reduced by 57%.
Younited: Rapid Growth, Weakened by Overvaluation
Younited, founded in 2011, started as a peer-to-peer lending platform before pivoting to a B2B model in 2018, enabling companies like Microsoft, Free, N26, and LDLC to offer credit solutions to their clients via its platform. Thanks to open banking and Younited’s APIs, the fintech has become a recognized player in the credit-as-a-service market.
In 2022, Younited raised $170 million from Goldman Sachs Growth Equity and Bridgepoint, bringing the total amount of funds raised since its inception to $400 million. The company also launched Younited Pay, a split payment solution aimed at capturing a share of the booming online commerce market, which surged after the COVID-19 crisis.
Since its creation in 2012, the fintech has financed over €6 billion in loans, with 50% of these outside of France, particularly in Italy, Spain, and Portugal. In 2023, Younited recorded a credit production of €1.1 billion, down 30% compared to the previous year.
Despite its development projects, Younited remains highly dependent on fundraising to sustain its growth. The startup, which aimed to reach profitability in 2022, has decided to push back that goal.
The Objective of Listing French Unicorns: A Misguided Ambition?
The acquisition of Younited by Iris Financial highlights the challenges many overvalued startups face and raises questions about the ambitions set by previous governments, which aimed to list 10 unicorns by 2025.
