In May of this year, OANDA, a US multi-asset broker, was acquired by CVC Capital Partners Asia Fund (CVC). The deal saw OANDA, one of the industry’s largest brokers come under new ownership with CVC taking a 98.5 percent stake in the firm.
Last month, a source close to the deal provided Finance Magnates with some of the details of the acquisition. CVC paid $160 million for their stake in the firm with the company valued at a total of $175 million. The private equity company also beat a number of competitors to take control of OANDA through a limited auction.
Despite the change in ownership, OANDA isn’t expecting any drastic changes. One man who is set to remain in his position is company CEO Vatsa Narasimha.
Since joining the firm as Chief Strategy Officer in 2013, Narasimha has been quick to move up the ranks at OANDA. Just over three years after joining he was promoted to lead the firm as CEO.
In the wake of OANDA’s acquisition by CVC, Finance Magnates spoke to Narasimha about what the firm’s new owners have in store, what role he played in the acquisition and what plans the broker has for the future.
A press release announcing the acquisition of OANDA described you as playing a “pivotal” role in the investment by CVC. Can you elaborate on what that role was?
OANDA was founded in 1996 and over the course of our 22-year history, the company has matured from a start-up to a leading global multi-asset brokerage. Over that time, we’ve been backed by several long-standing investors and venture capitalists. However, given the size and scale of our business today, it made sense for us to be owned by a private-equity firm that can help us implement a strategic growth plan. As such, I was asked to lead the process by the board of the OANDA Corporation for and on behalf of our current shareholders.
What led OANDA to go with CVC as opposed to other potential investors?
CVC Capital made perfect sense to our executive committee not only because they already have a deep-seated knowledge of the industry, but they also bought into our strategy for growth. As such, we felt they are were a great fit for OANDA.
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What changes do the new owners plan on bringing to the table, if any?
There will be no immediate change to the organizational structure of OANDA, and we will continue to implement the same strategy as planned. The key difference lies in the fact that the acquisition will open up a wide range of opportunities in terms of enabling us to execute our vision for both organic and inorganic growth in the coming years. This is a very exciting stage in our history.
What thoughts do you have on the valuation process, how it was undertaken and how well it reflects OANDA’s performance over the past few years?
Given this is a private transaction, the terms of the deal are confidential, however, what I can tell you is the management team and employees are very excited about CVC Capital coming onboard as new owners of OANDA. They bring with them a wealth of experience in our industry sector and a proven track record in developing online businesses within their portfolio.
OANDA had already developed a new 5-year business strategy prior to CVC taking over, can you give any insights into what that strategy will entail?
Over the years, OANDA’s core strategy has largely focused on organic growth, and we’ve invested heavily in our institutional-grade scalable technology, charting tools, educational materials, and up-to-the-minute market commentary in order to achieve results. This has helped us differentiate ourselves from the competition and attract and retain clients, so we’ll continue to prioritize this, expanding our range of asset classes and introducing new pricing models in order to help our clients be more successful.
However, CVC’s recent acquisition of OANDA also opens up a host of new strategic opportunities, which will help us grow top-line revenue quickly. CVC currently manages $70 billion in assets, which will enable us to turn our attention to driving inorganic growth around the world. As such, we are open to acquiring other companies in order to help us build our business.
You launched OANDA Pro earlier this year, was the launch of that service driven by institutional client demands, a gap you saw in the market or a combination of both?
The launch of OANDA Pro was actually driven in order to cater to the more sophisticated needs of institutional traders, providing them with access to a fully customizable platform, deep liquidity pools and real-time pricing that ensures a comprehensive view of the market at all times. Having identified an opportunity in the market, we launched the platform in order to meet the advanced requirements of professional FX traders.
Can we expect to see OANDA expand more into the institutional space in the next five years?
Yes, we plan to continue to develop our offering in this space. We’ve already had a very positive response to the launch of this product.
How do you see the new ESMA regulations affecting your European business? Do you have plans to scale back your retail operations there?
Europe still remains a strong growth region for OANDA, and because of the nature of our business model, we see the impact of the ESMA changes as largely immaterial to our growth ambitions there. The key components of the ESMA policy statement addresses: the prohibition of binary options, the implementation of leverage caps from 30:1 to 2:1 depending on asset class and the introduction of 50% margin closeouts. These new regulatory changes are very similar to our current European proposition.
To elaborate, OANDA has never offered binary options, has always been conservative when it comes to margin requirements, introducing responsible leverage that lies at the lower end of the market, and we already offer a 50% margin close out. As such, we believe the changes discussed by ESMA are a positive move that will help ensure the long-term sustainability of the retail trading industry.