Stephane Boujnah

Last week, Euronext confirmed an indicative offer for the Spanish wealthtech platform Allfunds, after media speculation forced its hand. An acquisition would make sense in terms of both revenue and diversification – if completed, the deal would see Allfunds account for more than a quarter of the exchange group’s bottom line.  

Read More – Euronext in talks to buy Allfunds, conditional on shareholder approval 

In addition, Allfunds recently created two new business lines: Allfunds Tech Solutions and a new data and analytics offering, which would strengthen Euronext’s tech and data focus – unlike other exchange groups, Euronext remains heavily exchange-focused, with equities still making up around 20% of its bottom line. However, the group is already expanding its horizons, with the Borsa Italiana acquisition and other initiatives driving its Advanced Data Services revenue up to €212.1 million in 2022, an increase of 15.1% on the previous year.  

In a conversation with The TRADE earlier this year, Euronext CEO Stephane Boujnah confirmed that: “We’re looking at potential new avenues in post-trade, in FX, in energy, in corporate services, in data, to take the company to the next level.”  

Discussing why Euronext has been perhaps slower to expand out into the data and technology space than some of its peers, Boujnah explained: “Most of the players that have diversified before us did so because they reached the conclusion that cash equity trading and listing is less profitable or scalable or has less organic growth than other activities. For all sorts of reasons, I think we have on our side demonstrated that cash equity trading can be a very profitable business and can bring a decent strong return. But we need to diversify into other asset classes now.” 

Read More – Fireside Friday with… Euronext’s Stephane Boujnah  

An Allfunds acquisition would certainly increase the group’s financial clout – the firm posted H1 revenues of €259 million in 2022, an increase of 5% year-on-year and representing around 34% (comparatively) of Euronext’s own H1 revenues (around €770 million in total for Q1 and Q2). Allfunds has over 3,000 fund houses on its books already, which would mark another attractive string to the Euronext bow. The firm listed on Euronext Amsterdam in April 2021 in a successful IPO that subsequently saw its assets under management jump 29% for the year to reach around €1.5 trillion.  

But sources familiar with the matter tell The TRADE that although the acquisition is attractive, Euronext will only proceed if the price is right and the terms meet its stringent M&A requirements. Should Allfunds receive a competing offer, and/or a bidding war kicks off, Euronext may be prepared to walk away rather than exceed its price objectives.  

It’s not an empty threat either – the group did the same thing in the battle for Bolsas y Mercados Españoles (BME), operator of the Spanish stock exchanges, in 2020: leaving the group to be acquired in an all-cash offer of around €2.5 billion from SIX Group. 

“We have a clear M&A discipline – we do deals when we can deliver a return on capital employed above our cost of capital after three to five years,” said Boujnah. “So far, we have always been in a position to achieve this return. In terms of the price of the SIX bid, we could not meet our target returns at that price.”  

It remains to be seen whether the latest Allfunds deal is able to meet the same requirements. 

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Deutsche Börse Group has invested $3 million into Caplight Technologies, a platform designed to enable institutional investors to hedge, generate income or take long and short positions on private company stock using structured products and synthetics.

The company, founded by Javier Avalos and Justin Moore in 2021, aims to bring public equity market-like transaction data, execution, and settlement mechanics to the private markets, thus allowing many large institutional investors to access the private markets for the first time.  

Venture capital-backed private companies represent over $3.8 trillion in value across over 1,000 companies, according to CB Insights. Caplight’s platform offers investors the ability to make long and short directional investments on Venture-backed private company stock using proprietary financial products and unique price discovery tools. Investors utilise the Caplight platform for the purpose of hedging, income generation, shorting, or investment strategies on private company stock. 

“Until now, the VC asset class has existed ‘long only’, meaning no ability to hedge or make directional investments. Caplight gives investors the tools to actively manage their risk across illiquid assets. We’re incredibly excited to be turning the hedging of private company stock into a product,” said CEO Avalos.  

Earlier this year, Caplight completed the first ever call option on private company stock, and is currently working on plans to explore collaboration opportunities with global derivatives exchange Eurex, a wholly owned subsidiary of Deutsche Börse, to bring structured pre-IPO investment products to the global financial markets. 

The latest raise from Deutsche Börse brings Caplight’s funding to $10 million, including a $5 million seed round led by Better Tomorrow Ventures that was completed in January 2022. Other investors include Fin Capital, Susquehanna Private Equity Investments, LLLP, and Clocktower Ventures. 

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Adam Toms, European CEO, OpenFin

OpenFin, an operating system for enterprise productivity across the financial system, has won a new strategic investment from ING Ventures, the venture capital arm of ING. The TRADE has learned that the investment amount is around $10 million.  

“Having yet another big, strategic investor like ING on board really drives home that what we are building – with and for the world’s largest banks – are necessary tools for today’s trader desktops,” said Adam Toms, European CEO of OpenFin, speaking to The TRADE.  

The announcement follows a period of accelerated growth since last year’s launch of OpenFin Workspace, a new visual interface of OpenFin OS which includes components for complex windowing, advanced search, actionable notifications and application discovery. Built on Google’s Chromium engine, OpenFin OS simplifies app distribution, unifies the digital workspace and enables improved communication and workflow between apps. 

“With the launch of Workspace last year, we enable users across banks and asset managers to consolidate and automate their workflows across desktops and applications, work smarter, faster, more collaboratively and effectively than ever before. And we do this at scale. With ING in particular, we are supporting its digital transformation strategies across the bank,” said Toms.  

OpenFin software is currently used at over 2,400 banks and asset managers across over 60 countries. The latest round of capital will be used to accelerate expansion of OpenFin OS to “every user within financial services”, according to the firm, whose software is already being used by 23 of top 25 global banks.  

ING first adopted OpenFin’s technology in 2021 to accelerate its desktop transformation strategy. “Being relevant, easy, personal and instant remains a priority for ING and our partnership with OpenFin further evidences our commitment in accelerating a superior customer and employee experience through digital,” Frederic Hofmann, co-head of ING Ventures, told The TRADE.  

The bank becomes the seventh major financial institution to invest in the operating system.  

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Olivetree Financial is currently at the centre of merger talks, the TRADE can exclusively reveal.

One of the interested parties is said to be New York-based financial services firm StoneX. It is unclear whether negotiations will result in a deal, and whether it will be a full buyout, merger or a potential joint venture. 
 
Olivetree recently conducted a strategic review of its operations in the US, resulting in a number of job losses, according to a source, who spoke on condition of anonymity as the matter is private.  
 
The broker is choosing to focus on European markets as this is where it sees more opportunity in the near term. It still employs a number of people in New York, the person added. 
 
An Olivetree spokesperson declined to comment. StoneX also declined to discuss the matter when contacted by The TRADE, beyond noting that the firm does not comment on “employee movement”.  

The number of independent brokerages in Europe has been falling in recent years following a wave of consolidation. TP ICAP, the world’s largest inter-dealer broker, acquired Louis Capital, an equities and fixed income specialist, in July 2020. In November of the same year, Makor Group announced that it had entered into a strategic alliance with rival Churchill Capital. 
 
A boom in deal-making has also seen firms adding headcount to teams that specialise in mergers and acquisitions. M&A in Europe reached a 14-year high in 2021 and deals involving European targets totalled $1.4 trillion, an increase of 46% over the previous year, according to data from Refinitiv. 
 
The surge in M&A activity worldwide has been fuelled in part by private equity funds and the growth of special purpose acquisition vehicles (SPACs), Refinitiv said. 
 
Olivetree recently added to its event driven team in London with two senior hires from BTIG, as reported by The TRADE. Greg Levett and David Abraham joined the broker in September 2021, while Tim Caulton also re-joined the firm in July. 
 
The firm also made a number of hires in the US around the same time, with the appointment of Richard Orlando and Robert Weibel, also event driven specialists. 
 
Event driven strategies seek to profit from corporate events, including merger and acquisitions, restructurings, and spin offs. 
 
StoneX, formerly known as INTL FCStone, describes itself as an institutional-grade financial services network. The company’s London-based subsidiary, StoneX Financial, joined the London Stock Exchange (LSE) and its pan-European multilateral trading facility (MTF), Turquoise, as a member in May of last year, in a move designed to expand its offering in cross-border equities and boost its cross-asset capabilities.  

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Nasdaq originally offered a deal worth more than $190 million in September, with a bid to acquire all shares and warrants in Cinnober for SEK 75 for each share and SEK 85 for each warrant.

Despite Cinnober recommending that shareholders accept the offer, only 82.6% of shareholders accepted the offer, below the minimum 90% required for the offer to pass.

The improved offer from Nasdaq is valued at close to $220 million, including an offer of SEK 87 in cash for each share and SEK 121 in cash for each warrant in Cinnober. Shareholders now have until 9 January to approve or reject the offer.

Speaking to The TRADE at the time of the original bid in September, Lars Ottersgard, EVP and head of market technology at Nasdaq, explained that the deal is aimed at building out the historic strengths of the two businesses.

“We have had good traction for many years for Market Technology, which has been growing steadily through the years. We have seen an uptake in interest in our capabilities to deliver solutions both to the wider capital markets and into new marketplaces,” he said.

“Cinnober has very common capabilities as we do in many spaces. Our biggest inhibitor for growth has been the capacity to deliver and support clients, and together we can grow much faster than as two isolated entities.”

In November the UK’s anti-trust regulation, the Competition and Markets Authority (CMA) confirmed it was investigating the proposed acquisition over concerns that the deal could result in a substantial reduction in competition within any market or markets in the UK for financial goods and services.

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This follows hot on the heels of 2017, when the headline-grabbing proposed mega-merger/”merger of equals” between London Stock Exchange (LSEG) and Deutsche Borse was spiked by the European Commission over concerns of a potential/very probably monopoly over the European markets, while there were significant buy-side tie-ups between Standard Life and Aberdeen Asset Management, and Janus Capital and Henderson Group.

So, with a cast of players including NEX and CME Group, State Street and Charles River, IHS Markit and Ipreo, The TRADE’s very first (and very unofficial) M&A awards runs the rule over most noteworthy of this year’s M&A activity so far.

Biggest game-changer: CME & NEX Group

The most significant of deals so far in 2018 is the £3.9 billion marriage between US futures exchange operator CME Group and the UK’s FinTech and electronic trading powerhouse NEX Group – formerly ICAP. While analysts may have rated CME Group’s £3.9 billion offer for NEX Group as exceeding market predications, it was nonetheless enough to deter rival exchange groups, such as LSEG, from swooping in with a higher bid. NEX Group’s shareholders have already voted in favour of the acquisition and the deal is, at the time of writing, on track to be completed later this year.

This merger should prove to be an absolute game-changer for the industry on more than one front, as both firms streamline trading operations and combine platforms, bringing cash and futures products together with over-the-counter (OTC) products. Should CME Group combine its clearing services with NEX Group’s OTC derivatives post-trade services provider TriOptima, more than a few feathers will be ruffled in the European OTC clearing market, with the likes of the London Stock Exchange’s LCH business the prime target to be knocked off its perch.

It’s also a firm commitment from CME to build out its operations in Europe following the closures of CME Europe and CME Clearing Europe last year, particularly in London where NEX Group is based. The exchange giant already has a sizeable presence in the UK capital which will more than likely be bolstered going forward through the addition of NEX, going against the overwhelming trend of financial firms looking for the exit in the face of impending Brexit chaos. Outgoing NEX chief executive Michael Spencer has been characteristically outspoken on the subject, talking up London’s prospects for the future and an advisory role within CME’s new acquisition means his influence will still be firmly felt internally.

Most dramatic deal: ION Investment Group & Fidessa

When it comes to sheer drawn-out drama, the award for the most dramatic acquisition of the year so far, there’s only one winner: Fidessa. After news of Temenos’ initially successful bid for the well-established industry vendor hit headlines in February, a sudden frenzy of counterbids from various other companies was triggered and an ongoing saga involving numerous participants, as well as involvement from the UK Takeover panel to chivvy the deal along.

After Fidessa accepted the initial £1.4 billion offer from Temenos, with a shareholder meeting planned to agree with the terms of the deal, the company announced – without the consent of the those involved – that ION Investment Group and SS&C Technologies had also approached the firm with higher offers.

Following weeks of uncertainty, competition and regulatory probes, Fidessa finally accepted a £1.5 billion offer from ION Investment Group that was 8.5% higher than Temenos’ original offer. Somewhat understandably, Temenos decided against raising its offer for the trading technology vendor and terminated its cooperation agreement.

It’s a compelling union, with Fidessa having long-established itself in the equities and derivatives trading world partnered with ION’s fixed income and foreign exchange (FX) focus. However, there may yet be a sting in the tail for Fidessa, as the UK Competition and Markets Authority announced an inquiry into the acquisition in mid-June, which at the time of writing, could either come to nothing or delay what has already been a roller coaster ride even further.

Most eye-watering fee: State Street & Charles River

One of the more recent acquisitions this year was State Street’s decision to buy Charles River Development for an eye-watering $2.6 billion. It’s a deal that industry pundits agree makes sense, despite the whopping price tag, with Charles River’s flagship Investment Management System (IMS) boasting a client base of 50 of the top 100 asset managers, accounting for more than $25 trillion in assets under management. The Boston-based custodian bank has been at the forefront of the recently-established trend for back and middle-office providers looking to bolster their front officer activities.

However, investors were spooked by the significant fee shelled out for Charles River as headlines began to flood social media and news outlets. With the order management system (OMS) specialist posting around $300 million in revenues last year, it quickly became clear that State Street is set to cough up nine times that amount to secure the deal.

State Street saw its market capitalisation plummet $2.9 billion the day the deal was announced, the exact amount State Street offered for Charles River. The bank’s market capitalisation fell approximately 7% and the custodian saw its biggest drop in value over the course of a single day for more than two years. But, as custody banks do battle on new fronts, while calls for lower fees from their clients rattle on, State Street could find itself ahead of the curve when Charles River, which will act as a stand-alone business, settles down into its new stable and optimisation of its offering beings in earnest.

Biggest data deal: IHS Markit & Ipreo

News of data and analytics services giant IHS Markit acquiring rival Ipreo certainly proved to be a topic of interest amongst readers of THE TRADE when the deal was announced back in May. IHS Markit agreed a deal to buy the firm for $1.9 billion from private equity funds managed by Blackstone and Goldman Sachs Merchant Banking Division, which in turn acquired Ipreo in 2014 for $975 million.

Since Goldman and Blackstone invested in the company, Ipreo displayed tremendous growth with revenues up 60% and several new product launches, while also onboarding a raft of new buy-side clients and carrying out its global expansion strategies. For buy-side firms with data strategies at the top of their agendas for regulatory compliance, decision-making and performance optimisation, mergers such as this often provide an opportunity to re-evaluate their existing data set-ups and react accordingly. IHS Markit’s acquisition of Ipreo officially closed in early August, and Ipreo’s services are already being combined with IHS Markit’s in a bid to immediately add value for clients for both firms.

At the same time the news landed about plans to buy Ipreo, IHS Markit quietly announced it is seeking a buyer for its end-to-end OTC post-trade processing business. There has been no movement on this one, at the time of writing, but the business seems to be gaining ground following a partnership which saw the derivatives reporting segment of the business connect to CME Group’s trade repositories in Australia and Europe.

Best merger of equals: Itiviti & Ullink

The “merger of equals” tagline was thrown about a lot last year during Deutsche Borse’s wooing of the LSEG as part of its failed bid to create a German/British exchange behemoth. While this year hasn’t thrown up a deal with quite the same proportions (yet), the phrase seems to have stuck in people’s minds.

In a deal labelled a “union of equals”, trading systems providers Itiviti and Ullink completed plans to merge in March, forming a $200 million Franco-Nordic technology powerhouse. The combined entity now boasts more than 1,000 employees and a local market presence in all major markets across Europe, Asia and the Americas. Integration work of the two products sets began in earnest in April shortly after the deal was finalised. Echoing that of Fidessa and ION Investment Group’s deal, the merger connects Ullink’s buy-side equities and derivatives trading products and services with Itiviti’s market making technology platforms that have predominantly focused on the sell-side.

Consolidation among trading technology vendors is an almost constant vein running through trading activity, as new and old firms alike are sized up and then devoured.

As Itiviti’s chief executive, Torben Munch, pointed out at the time of the announcement, increasing regulatory pressures and changing market structure means market participants are now looking for full-service technology vendors that they can truly rely on.

While much of last year’s M&A activity focused on vendors looking to bolster their back- and middle-office portfolios ahead of the introduction of MiFID II, the market has now turned its attention back to the sharp end of business and managed solutions, and deals of this nature may become a lot more common going forward.

Honourable mentions

High-frequency trading (HFT) continued to condense earlier this year following Hudson River’s move to buy rival market maker Sun Trading. Terms of the deal were withheld, but it didn’t come as much of a surprise to the industry, as high-speed trading firms continue to battle low market volatility, increasing costs and shrinking revenues. The trend continues from last year, when Virtu Financial were quick to snap up KCG last year in a deal estimated to be worth $1.4 billion as it looked to establish a HFT powerhouse.

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