| ZURICH/LONDON, March 22
ZURICH/LONDON, March 22 Swiss banking software
and services provider Avaloq has got a 300 million
Swiss franc ($300 million) injection from private equity firm
Warburg Pincus in what the group described as a first step
towards a potential public listing.
The deal, which values Avaloq at more than 1 billion Swiss
francs, will give the New York-based firm a 35 percent stake in
the Swiss group, the partners said on Wednesday.
Banks are turning to outside software providers for help in
running core banking operations to cut costs, meet stricter
regulations and fend off fintech rivals as they address
mercurial consumer expectations.
Avaloq -- which has wealth managers, boutique banks and a
growing number of global finance groups as clients -- has
branched out of late, taking on more of banks' back office work
in its own service centres and opening new centres in Singapore
"If you can offer a lower cost of operating and processing
because the company does it across more than 150 banks and
wealth managers with more innovative products than in-house,
then that's a win-win," said Adarsh Sarma, a Warburg Pincus
"(Avaloq's) biggest products are focused on wealth
management, which is the largest fee generator for banks – it's
a bright spot."
Rivals such as Temenos have grown rapidly as their
clients, focused on conserving capital in the face of falling
fees and low interest rates, offload more of their technology
and back-end operations. But some have struggled to fulfil
expanded commitments after signing major contracts.
Avaloq said it had been consolidating its back-office
business in early 2016, servicing Deutsche Bank's
Asian wealth management and Hong Kong and Singapore offices, as
well as six European banks.
"This deal is about being able in a controlled manner to
grow again with a mature partner," a spokeswoman said.
Warburg Pincus, with $10 billion of its total $44 billion in
private equity under management invested in 90 finance and
financial technology (fintech) firms, was once the largest
investor in one of the world's biggest banking technology
companies, Fidelity Information Services. It pointed to its
experience in helping businesses to grow.
"Their global presence ... combined with their extensive
experience in financial services and software and large network
in the broader banking and wealth management industry will be
invaluable as we enter a new stage in the development of Avaloq
and its geographic expansion," Avaloq founder and Chief
Executive Francisco Fernandez said in a statement.
The group, which generated 533 million Swiss francs in sales
last year, said its market is set to keep growing.
Fernandez will retain a 28 percent stake in the firm, while
staff and management will retain a further 27 percent. The deal
is expected to close in the second quarter of 2017 with an
investment horizon of seven years.
($1 = 0.9934 Swiss francs)
(Additional reporting by Eric Auchard in Frankfurt; Editing by