The banking software’s major shareholder is going ahead with a sale process it hopes will fetch as much as $2 billion, finews.com has learned. The process reveals differing priorities between founder, top executives, and private equity.
The Zurich-based company is fielding approaches from suitors until mid-August, after starting the first round of a sale process, a person familiar with the matter told finews.com. The move comes after private equity firm Warburg Pincus, which owns 45 percent, elected to exit its three-year investment in Avaloq, as finews.com reported exclusively last month.
The sale process, which Warburg and Avaloq aim to wrap by year-end, is highlighting some differences in secondary priorities among the two sellers as well as the software firm’s management. Under CEO Juerg Hunziker, Avaloq top executives are incentivized via stock, and concerned about the value of their holdings under new ownership, this person said.
Coterie Of Suitors
Francisco Fernandez, who co-founded the firm with Ronald Straessler in 1985, is also interested in a legacy – such as Avaloq’s brand name – remaining intact. By contrast, the private equity firm primarily defines a successful sale through the price it can fetch. Fernandez didn’t respond to a request for comment.
Avaloq and Warburg Pincus declined to comment on the proceedings, some details of which were first reported by «Mergermarket,» (behind paywall). The U.K. trade publication cited private equity houses Permira, EQT, TPG, Advent, Bain, Astorg, Cinven, KKR, CVC, and Hg as «showing interest». It also speculated that trade buyers may include rival Temenos – which last year snapped up a major deal with Kony – as well as FIS, and ION Group.
Hamstrung After Clash
The sale process comes against the backdrop of a falling-out between Fernandez, now company chairman and 28 percent owner, who was interested in long-term investments, and Warburg Pincus, which aimed for a short-term profit fillip that is typical for the private equity industry. The clash left the private equity heavyweight hamstrung to see through its investment case, as finews.com reported.
The two agree on a $2 billion valuation, which «Mergermarket» reported is derived from a value of 20 times Avaloq’s earnings before interest, tax, depreciation, and amortization, or EBITDA, which stood at 97 million Swiss francs ($106 million) last year. Avaloq is being advised by investment banks Goldman Sachs and Barclays.
Second-Time Sale
The process represents the second time Fernandez has sold Avaloq: he and co-founder Straessler both reduced their stakes in the company in 2017. The company, which is mired in complications in a major German project, didn’t actually receive any of the 350 million francs the private equity giant invested at the time.
Warburg Pincus’ entrance coincided with Avaloq’s sharpened strategy to shift into a more piecemeal software service model dubbed SaaS. Profitability has lagged for several other reasons as well, including a high double-digit million cloud-based effort and a dividend to its shareholders in 2018.
