Bargain Hunters? Exclusive Details on the OANADA-CVC Acquisition

The private equity firm paid $160 million for a 98.5 percent stake in the retail broker

Finance Magnates has learned more about the acquisition of OANDA by CVC Partners Asia Fund (CVC). The deal, which Finance Magnates reported on last month, will see CVC taking a 98.5 percent stake in the retail broker according to a source involved in the acquisition.

The acquisition saw OANDA being valued at a total of $175 million. This valuation was based on last year’s earnings before interest, taxes, depreciation, and amortization (EBITA) which totaled $35 million.

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As CVC will be taking a 98.5 percent stake in the firm, they will pay a total of $160 million. This figure does not include any other transaction costs that the firm may have to pay and the remaining 1.5 percent in equity is classified as management profit interest.

To some degree, the $160 million price tag shows how OANDA has slipped down in the global hierarchy of FX firms. Indeed, given OANDA’s past successes, especially its dominance in the US retail market, CVC paid a reasonably low price for their newest acquisition.

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CVC appears to have acquired OANDA through a joint auction. It remains unclear as to who else was involved in this joint auction.

Why Buy?

A number of reasons seem to have driven CVC to invest in OANDA according to the source. The private equity fund appears to believe that the retail broker has the capacity to consolidate firms in more fragmented geographies.

Perhaps more importantly for its investors, CVC seems to have faith in OANDA’s long-term risk management strategy. On top of this, interest rates and increasing volatility in the FX market appear to have made OANDA an attractive investment proposition for CVC.

It may have fallen down the ranks in recent years, but OANDA has been a big player in the retail trading business for over twenty years now. The firm is the largest retail FX platform in Singapore and the second largest in the US. This year the firm started to make inroads into the institutional market with the launch of its liquidity-providing service, OANDA Pro.

Despite the acquisition, the OANDA personnel seems unlikely to change as Chief Executive Officer, Vatsa Narasimha, will hold on to his position and lead the company forwards. Given the company’s recent foray into the institutional market, as well as its new owners, it seems likely the company’s efforts to expand will continue.

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