One of the highlights of the Forex Magnates London Summit was the M&A Panel which featured CEO’s of some of the largest retail FX firms. The panelists discussed where M&A fit into their business plans, what types of companies would be attractive to them, and current environment for valuations of forex related companies. The discussion was both serious and candid with Gain Capital’s Glenn Stevens telling the audience of his desire to dump suits and ties and go for the hoody look, Saxo’s Christensen worrying that MT4 will probably fold since they finally got around to using it, and Alpari’s Skowronski stating they are ready to buy FXCM and Gain now that their stock prices are down.
Lars Seier Christensen, Founder & co-CEO, Saxo Bank
Daniel Skowronski, UK CEO, Alpari
Drew Niv, CEO and co-founder, FXCM Inc
Oki Matsumoto, Founder and CEO, Monex Group, Inc. Japan
Glenn Stevens, CEO, GAIN Capital
Moderated by: Michael Greenberg, CEO Forex Magnates
3:00 – Drew Niv responds to question of whether M&A is the broker’s main growth strategy. “We like to pretend that its not, but it is… If you asked me three years about only doing M&A, I would have told you that only CEOs who don’t know how to grow their businesses are doing M&A. But, did four deals in last two years and planning to do more.
4:00 – Is M&A needed for growth, Niv “in this environment, cheaper to acquire customers with M&A”
5:00 – Niv – regulations and low volatility are biggest drivers of M&A activity, adds “never had a period that they are talking to so many people at the same time… we are a cheap company, so if people are talking to us, means lots of desperate people out there.”
7:00 – Lars Seier Christensen, responds to what is Saxo’s M&A focus “people ask if we are a bank, and yes we are.” Explained that they are more than just forex and offer products to a very wide array of products such as wealth management. Saxo doesn’t target companies with their own technology as they have their own. Target small acquisitions in regions that Saxo isn’t as strong in and also WL’s that already have relationships with Saxo
10:00 – Christensen responds to question about adding MT4and investment in Leverate –part of their strategy to provide a wide net of products to clients. Plans to expand MT4/5 presence
13:00 – Daniel Skowronski answers that why Alpari isn’t a big acquirer other than buying CMS Japan’s business. Jokes that they are planning to buy FXCM & Gain Capital with their stock prices down so much. “Alpari isn’t public, so don’t have to answer to shareholders… We are all about organic growth, and invest in people.” Being the largest MT4 broker causes difficulty for them to make an acquisitions that aren’t offering similar products. Only reason they made deal with CMS was that regulators kicked them out of Japan with new regulations and they bought CMS to quickly buy a regulated entity to reenter into Japan.
16:00 – Skowronski – goal to invest in people, even as valuations are falling
17:00 – Glenn Stevens responds why they bough Open E Cry – “For us, it wasn’t so much about FX, but about a play on the US and buying a complimentary business to offer active traders…. CME isn’t going away soon, so if you can’t beat them, join them.”
20:00 – Stevens answers about GTX unit – “were late to institutional offering… managing to grow business… but yes, discussing ways of expanding it” possibly through M&A.
22:00 Stevens won’t give Greenberg any scoops
24:00 – Oki Matsumoto answers why Monex is expanding out of Japan and whether it is due to worries about Japan. “Japan is HUGE market” explains that even if Japan stays strong, the rest of the world like China is growing. Therefore, in 10 years from now the mindset of investors changes and you need to offer a global product to meet the changing investor interests.
27:00 – Matsumoto answers if it is better for Japanese brokers to buy foreign brokers or open from scratch – went on rave about Japanese regulation “Japanese regulation is bad.” But expects regulation in Japan to change and become more global
30:00 – Is IPO a good exit strategy: Niv “Thought that going public would open the door for more companies… but did opposite. Investors don’t have appetite for FX companies…. Going public creates more honesty of what you are and worth…. Advantage of being public is way better when talking to counterparties and banks… Only way in the future for another IPO if other firms merge together first to create larger company”
34:00 – Stevens “Hard to long term views when measured in 90 day chuncks”
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36:00 – Stevens “US investors have no idea about FX market, analysts covering them may not even know IG Markets who is public…. When things are going well and have a strong stock, is worth it. In this environment it isn’t.
37:00 – Niv “Investor ignorance is a big problem in public markets and can’t be underestimated”
38:00 – Q: What recommendations to companies that want to be bought?
39:00 – Christensen “Prefer small deals… looking for small brokers where we don’t have a geographical footprint… Looking for NEW Media and viral ways to reduce expenses for acquiring companies.”
41:00 – Skowronski “Wants to do IPO, but not US… looking to get bought, talk to Drew or Glenn, but if you are an entrepreneurial individual with ideas, we want to talk to you.”
43:00 – Matsumoto – “At my company, FX transactions 30x in 5 years and equities fell 90%, not sure if FX keeps growing but investor interests are changing… looking for companies that can meet the changes in demand, could be technology, could be products, but doesn’t exist in market today”
44:00 – Audience Question “What social media areas look exciting other then Facebook or Linkedin?”
45:00 – (Best line of the day) Stevens “We were all talking about wearing hoodies today instead of suits, whatever it will take to raise the stock prices.” …. “If you look at MT4, customers are looking at others for ideas…. Customers in retail look for guidance. Easier to buy EA’s then create own trading strategies. Platforms with lots of trading tools don’t get uses. People like it that it is there…. People will buy apps rather then make themselves. Market for selling other ideas. “
48:00 – Niv “Since MT4, no holy grail in retail forex that if you have can lower client acquisition costs…. Monitor what clients are requesting, and don’t see ‘one’ product that everyone wants.”
50:00 – Skowronski – “Social is still unknown… reason why Alpari hasn’t invested much in it and continues to look at MT4 and EAs.”
51:00 – Christensen “Buying media sites. Newspapers struggling… integrating more with classical media is way to help the media sites drive additional revenue and more efficient way for us to acquire clients.”
54:00 – Audience Question “Future of MT4/5 in three years time?”
55:00 – Stevens “Future of MT4 depends on how viral new platforms will be…. MT4 has proven itself, and depending on how it reinvents itself will stay strong…. Doesn’t see new platforms that look ready to displace MT4 now.”
58:00 – Niv “Hard to see where we are at in 5 years…. Things have to change. … If you are only betting on MT4 in the future, you are taking a big risk since products are always changing.”
61:00 – Skowronski “Keep seeing growth in MT4 due to new technology providers springing up around the product…. People watching MT5, not like a windows update but a new platform that does much more than MT4.”
63:00 – Christensen “MT4 better not go away quickly since we just got there… What will change though is that the amount of MT4 providers can’t be sustained. Will affect the overall strength of the platform…. (Saxo) is more interested in MT5”
65:00 – Matsumoto “Huge space for MT4 to grow in Japan, not very big there now”