The banking and wealth tech firm is seen as offering strong prospects for the New York-headquartered private equity house.

New York-headquartered private equity house Warburg Pincus has agreed to buy a 35 per cent stake in Switzerland-based banking and technology firm Avaloq in a deal valuing the latter company at more than SFr1.0 billion ($1.0 billion), and described by the firms today as a way of accelerating Avaloq’s growth.

Terms of the transaction weren’t disclosed. The deal is expected to be completed in the second quarter of this year.

The transaction allows Avaloq to rebalance its shareholding structure and bring in an experienced partner to help in the “next phase of growth and value creation, with an investment horizon of seven years”, Avaloq said.

Securing such an investment from Warburg Pincus, which has more than $10 billion invested in more than 90 firms, is a coup for Avaloq, a firm that already serves 155 banks and wealth management clients worldwide. The deal comes on the back of relatively robust results for Avaloq last year. In 2016, it generated full-year revenues of SFr533 million, up 10 per cent on a reported basis from the previous year. Earnings before interest, taxes, depreciation and amortisation rose 41 per cent to SFr82 million from SFr58 million in 2015.

In Warburg Pincus’s case, investments in the financial services stake include AllFunds Bank, Arch Capital, China Huarong Asset Management, FIS/Metavante, HDFC, Interactive Data Corporation, Mellon Bank, Network International, Elavon, Sterling Financial Corp, Santander Consumer USA, Wall Street Systems and Webster Bank. 

“The market for Avaloq’s products and services is due to grow significantly based upon increasing demand for digital banking, outsourcing, software as a service (SaaS) solutions and the overall development of the banking digital ecosystem,” the firms said in the statement.

Roles
Avaloq founder and chief executive Francisco Fernandez will also assume the role of chairman. Jürg Hunziker will serve as deputy CEO and group chief markets officer.

As part of the transaction, Avaloq is creating a European advisory board to support the strategic initiatives and growth. The board will include Jacques Aigrain, former CEO of Swiss Re and chairman of LCH.Clearnet, Stefano Boccadoro, the former general manager of Cassa Lombarda Bank and CEO of Santander Italy, Stefan Krause, former chief financial officer of Deutsche Bank and BMW and Javier Marin, former CEO of Banco Santander.

“While Avaloq’s management, employees and current Board of Directors retain the majority by means of shares and governance, we will leverage Warburg Pincus’ expertise to continue our path for capital market readiness,” Fernandez said.

As part of the deal, Fernandez will retain an approximate 28 per cent shareholding. Management and employees will retain an additional 27 per cent shareholding. The transaction does not affect the shareholding of the bank Raiffeisen Switzerland.

When the deal is closed, Warburg Pincus will nominate two individuals to join Avaloq’s board of directors.