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NEC buys Swiss Avaloq Group for 2.2 bn dollars

NEC buys Swiss Avaloq Group for 2.2 bn dollars

Tokyo (SCCIJ) – The Japanese IT group NEC takes a big step into the growth field of core banking software by acquiring the Avaloq Group headquartered in Freienbach, Switzerland, for CHF 2.1 billion. Avaloq will continue to operate as an independent unit headquartered in Switzerland. Both parties expect the takeover to be completed by April 2021.

NEC buys Swiss Avaloq Group for 2.2 bn dollars

NEC takes over the Swiss banking software provider Avaloq (© Avaloq).

Valuable Swiss brand

The New York-based private equity firm Warburg Pincus holds 45% of Avaloq, with the remainder divided between the Chairman of the Board of Directors and founder Francisco Fernandez and employees. Warburg paid CHF 300 million for a 35% stake three years ago. In 2019, the Swiss group founded in 1985 had posted a loss of CHF 29.8 million due to investments in data centers, while turnover increased by 6.4% to CHF 609 million.

“We have found a long-term oriented owner,” Avaloq CEO Jörg Hunziker told the Swiss financial paper Finanz und Wirtschaft. “We were convinced by the background of NEC. They let companies act autonomously in their portfolio, intervening only through the board of directors. We also expect a stronger international presence, especially in Japan and Taiwan, where NEC is doing well.”

Tokyo-based NEC, which has almost 113,000 employees and 300 subsidiaries in more than 50 countries, said the acquisition would enable it to enter the European financial market. About 150 banks and asset managers in 30 countries use the Swiss cloud-based software, including Deutsche Bank, Nord/LB, BBVA, HSBC, and Barclays. “By acquiring Avaloq, NEC is acquiring in-depth expertise in the digital financial sector and is opening up this segment worldwide,” the announcement stated.

Banking digitalization

NEC has been focusing on software sales in its recent restructuring, which involved the elimination of 3,000 jobs. The Japanese want to benefit from an increased digitalization of services in the banking sector. “We expect long-term growth in this field,” explained NEC CEO Takashi Niino.

The Japanese, who were the largest manufacturer of processor chips in the 1980s, want to utilize their existing sales channels in Europe for the Avaloq software-as-a-service “Banking Suite” and its wealth management platform. A year and a half ago, NEC had acquired the Danish IT group KMD for DKK 8 billion. Before that, NEC paid £475 million for British company Northgate Public Services.

According to Niino, NEC will integrate its technologies for blockchain, artificial intelligence (AI), and facial recognition into Swiss software and improve the data security of Avaloq clients. Avaloq would start to collaborate with NEC’s research centers such as the one in Heidelberg, Germany, to anticipate future trends as early as possible and build smarter solutions for clients.

Conversely, Avaloq intends to open up new markets via NEC. As a provider of digital solutions for asset managers, Avaloq also wants to help extend such services to “wealthy mass investors”. This step would open up a highly attractive segment of new customers for private banks and asset managers worldwide.

Text: Martin Fritz for SCCIJ

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