European exchange group Euronext has become the latest to
buy into the OTC FX market, announcing it has acquired around 90% of FastMatch
for $153 million initial cash consideration.
FastMatch’s management will remain invested with around a10%
interest, with minority rights. Closing is subject to regulatory and anti-trust
approvals, and is expected to occur in Q3 2017.
Euronext says the deal is part of its strategy to actively
leverage its balance sheet to capture value accretive opportunities and to
accelerate growth and diversification of our revenue base in line with its
strategic plan ambitions. “As such, the investment in FastMatch will not consume
any resource dedicated to the deployment of our Agility for Growth initiatives
(€100 to €150 million), which remains a key priority for Euronext,” the
“The acquisition of
FastMatch breaks new ground for Euronext, through expansion into the FX market
which is the world’s largest traded asset class,” says Stéphane Boujnah,
chairman and CEO of the managing board of Euronext. “This will broaden the spectrum of products we provide to capital
market users, whilst meaningfully diversifying our revenue and creating
long-term value and growth for customers and shareholders.
“The combination of
FastMatch’s in-depth FX expertise, leading technology platform, diverse
customer base and entrepreneurial spirit with Euronext’s scale, strength and
credibility, will position Euronext as a trustworthy infrastructure provider
servicing a market where participants are increasingly looking for
transparency, reduced capital costs, cutting-edge trading and long-term
clearing solutions,” he adds. “The transaction is consistent with our
disciplined approach to M&A and our Agility for Growth strategic plan
announced on 13th May 2016, including our goal of attracting the best talent
Dmitri Galinov, founder and CEO of FastMatch, adds, “We are very excited to become part of
Euronext, an exchange group on the frontline of innovation and agility in the
industry. Together, we will accelerate our vision of bringing transparency,
best-in-class technology and execution to FX markets globally. Our superior
technology will serve as catalyst to Euronext’s strategic ambitions in growing
into the FICC in Europe.”
Euronext says the
G20 post-credit crisis response has created a regulatory drive for OTC and dark
trading towards transparent, neutral and centrally cleared markets. It adds
that new capital requirements further underpin “an urgent need for greater
efficiency and deep structural change of the OTC landscape”.
“Nowhere is this more relevant than in the $5.1 trillion
daily foreign exchange market,” Euronext says. “This new environment, driven by
regulatory changes and the client’s need for more transparency and efficiency
has resulted in a clear trend of electronification of spot FX trading where 66%
of trading in 2016 was electronic, growing from 55% in 2010.”
A deal involving FastMatch has been widely rumoured since
one of its original shareholders – FXCM – was financially hurt after the Swiss
National Bank removed the franc ceiling against the euro in January 2015. It
was established in 2012 by Credit Suisse and FXCM.
Euronext says it will bolster FastMatch’s European presence
through increased access to institutional clients across Europe. Additionally,
the roll-out of real-time and historical data products will be pursued in the
short-term. In the mid-term, FastMatch and Euronext will aim to achieve
presence in the FX derivatives space.
As of Q1 2017, FastMatch generated $5.8m revenue, up 48.8%
compared to Q1 2016, and $2.4 million EBITDA (41.0% margin), 3.6x the EBITDA of
Euronext says the transaction will be immediately accretive
to its earnings and mid-single digit EPS accretion is expected in the
medium-term before synergies. The transaction is fully consistent with Euronext’s
disciplined M&A policy and will accelerate the growth profile of the group.