NEC has agreed to acquire Avaloq in order to secure a global pathway into the digital payments market.
Announced on October 5, the deal will bring Avaloq under the Japanese IT group's umbrella, although Avaloq will continue to operate using its own brand.
Under the terms of the agreement, NEC will pay CHF 2.05 billion, or approximately $2.23 billion, for 100% of Avaloq shares. At present, 45% is owned by global private equity firm Warburg Pincus, whereas the rest are held by the firms' founders and employees.
Founded in 1985, Avaloq is an IT solutions company now specializing in banking, wealth management, and the digital payments space. The firm has developed business process as a service (BPaaS) and software as a service (SaaS) cloud solutions for banks and financial organizations.
Headquartered in Switzerland, Avaloq is listed on the Tokyo stock exchange (TYO) and has a presence in over 50 countries.
Avaloq has traditionally served high-end wealth managers and private banks but intends to "democratize" this area in the future by expanding to include "affluent investors" rather than just high net-worth individuals.
"Clients will continue to enjoy the high level of service they've grown used to," Avaloq says. "This transaction will not lead to a reduction in workforce and the management remains fully committed to Avaloq's growth story."
While NEC is the provider of a range of IT solutions in industries spanning from aerospace to data analytics, by picking up a company already established worldwide in banking technology, the organization will add digital finance to its bow -- as well as the ability to enter this market on a global scale.
The news comes on the heels of a partnership between NEC and Vista Equity Partners to establish a JV, SaaSpresto Ltd., which will co-market and sell solutions from the Vista portfolio to Japanese businesses.
The founder and chairman of Avaloq, Francisco Fernandez, said that the deal will put the company in the "best hands possible" that could see "Avaloq grow and prosper further, for many years to come."
"NEC strongly believes in the importance of safety and security around financial institutions, which is absolutely crucial for sustainable prosperity and digital inclusion," NEC CEO Takashi Niino commented. "NEC aims to further expand its business in the digital government and digital finance areas, by globally developing SaaS and BPaaS business models that utilize software and technologies from throughout the NEC Group, including Avaloq's."
The acquisition is expected to complete by April 2021, following regulatory approval.
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