Wednesday, September 28, 2022

Global Fintech: Japan’s NEC buys Swiss Avaloq for $2.2 billion

NEC

Japanese tech giant NEC buys Swiss Avaloq, Europe’s largest banking software developer, for 2.05 billion Swiss francs ($2.2 billion), the company said in a statement issued on Monday.

“NEC will be placing great importance on building long-term relationships with Avaloq and its customers and aims to create new solutions that combine Avaloq’s software with NEC’s cutting-edge technologies,” said Takashi Niino, President and CEO, NEC Corporation.

NEC is planning to acquire all 52,488 shares of Avaloq’s parent company by April 2021, as it looks to dip its toes in the knowledge and digital finance software technology sphere to increase their market share and growth.

NEC’s acquisition of the Swiss company, signals its biggest foray into the global fintech space, ending a three-year investment by Warbug Pincus – SFr300m for a 35 percent stake in 2017.

Avaloq houses more than 2,300 employees and serves almost 150 banks and wealth managers across Europe, including the likes of Deutsche Bank and HSBC; the company reported sales of 610 million Swiss francs ($664 million) in 2019, the majority of them originating from Europe. 

“NEC is looking to leverage Avaloq’s blockchain and facial recognition technologies to serve a wider array of clients worldwide,” Niino told reporters at an online news conference.

Research-oriented collaboration

The Japanese electronics giant will plan and develop a series of studies that will focus on anticipating future trends, especially in the field of biometrics.

A broader sphere for Avaloq

NEC has stated that it plans to increase the democratization of financial services with this new acquisition by broadening Avaloq’s scope beyond high-end wealth management and private banks.

“Digital inclusion is going to be one of the most important topics in the future. Customized wealth management advice remains almost exclusive to high net worth individuals to date,” both companies said.

“Through digitization, Avaloq will be able to democratize wealth management and make asset classes and advice-led banking services, which are largely reserved for the wealthy only, available to mass affluent investors as well,” they added.  

NEC will develop its business process as a service (BPaaS) and software as a service (SaaS) to expand its business in areas related to digital government and digital finance.

It is important to note that this acquisition comes following years of restructuring within the Japanese firm, which resulted in the loss of 3,000 jobs as well as cutting unprofitable business practices.

Back in 2019, NEC purchased KMD, a Danish IT services group for Dkr8bn ($1.2bn), in addition to its £475m takeover of UK’s Northgate Public services in 2018. In parallel, the Tokyo-based electronics giant also sealed a capital tie-up with Japan’s largest telecoms operator NTT to better compete in the global race to supply 5G equipment.