Behind the SafeCharge Deal: Tech, Development and Consolidation

Anybody who attended the iFX Expo in Cyprus two months in the past will know that there are a whole lot of funds firms on the market on this planet as we speak. Actually, strolling across the occasion in Limassol, it appeared that there have been extra firms processing funds than overseas change brokers – no imply feat contemplating that there are lots of of buying and selling companies working in Europe alone.

Of the various funds firms attending the occasion, one of many larger names was SafeCharge. Based in 2006 by Israeli billionaire Tedi Sagi, the agency introduced on the second day of the Cyprus occasion that it had been acquired by Nuvei, a Canadian agency, for $890 million.

The deal is believed to have netted Sagi a whopping $600 million. It was the newest occasion of the billionaire trying to divest himself from his holdings within the know-how and playing trade. Together with the sale of SafeCharge, the Israeli businessman offered off his total stake in on-line gaming agency PlayTech final 12 months.

Complementary, not aggressive

Given the sum of money he constructed from the deal, it’s not onerous to know why Sagi wished to promote his stake Safecharge. Nuvei, however, is unlikely to have been motivated by a want to fill the businessman’s coffers. However figuring out why they wished to purchase Safecharge hasn’t been notably simple.

Finance Magnates reached out to the 2 firms to get a greater understanding of the acquisition, however each refused to remark, saying that the deal nonetheless must be accomplished earlier than any bulletins will be made. Nonetheless, each events have dropped some massive hints as to why the sale came about.

Talking to Israeli outlet Globes the day after the announcement, SafeCharge CEO David Avgi, who co-founded the corporate with Sagi, mentioned that the acquisition provided progress alternative for Nuvei, each when it comes to geography and enterprise verticals.

“It’s a case of two complementary firms, not opponents,” he mentioned. “On a geographical stage, they give attention to North America, whereas we primarily give attention to Europe and Asia, and just lately entered the Mexican market as effectively.

“On the sector stage, we’ve got pretty giant on-line prospects, whereas they give attention to [small-to-medium size businesses]. We don’t share the identical prospects or the identical markets, and our merchandise are additionally a bit completely different.”

Going overseas

Although he implied in any other case, Avgi’s agency is definitely turning its consideration to the US market. An enormous proportion of SafeCharge’s income is generated by playing firms. That’s largely attributable to Sagi’s personal success in, and understanding of, the trade.

The US market, nonetheless, has at all times been onerous to enter as a result of most on-line playing has been unlawful since 2006. In Might of final 12 months that modified when the US Supreme Court docket struck down a country-wide ban on sports activities betting. A couple of months after that, SafeCharge mentioned it might be partnering with sports activities betting and e-gaming agency Mazooma to supply fee providers to the US playing trade.

How profitable these efforts have been isn’t but clear. However working with Nuvei, which has workplaces in each the US and Canada, in addition to expertise working in America, solely appears possible to enhance issues. The newly shaped entity may also have its headquarters simply north of the US border in Montreal.

Tech pursuits

Alongside diversifying its set of shoppers and geographical operations, Nuvei seems to have been fascinated by SafeCharge’s know-how providing.

In its personal press launch asserting the deal, the Canadian funds agency mentioned that buying SafeCharge “will permit it to additional strengthen its know-how platforms by leveraging the progressive, leading edge know-how developed by SafeCharge.”

“We’re very excited in regards to the mixture of SafeCharge and Nuvei,” added Philip Fayer, Nuvei’s Chairman and CEO. “We predict the know-how platform SafeCharge has developed is outstanding and can function the go-forward basis from which we are going to proceed to develop the mixed enterprise and supply best-in-class services to our prospects and companions.”

Precisely what know-how the corporate is after is unclear. Each SafeCharge and Nuvei provide a complete set of funds options to their shoppers. So even when they don’t function in the identical industries or jurisdictions, a lot of their know-how does look like pretty comparable.

Mutual help

Having mentioned that, their give attention to different types of shoppers might imply SafeCharge’s know-how is in some methods superior to Nuvei’s. For instance, the Canadian firm pointedly talked about SafeCharge’s danger administration capabilities in its assertion asserting the acquisition.

That doesn’t imply Nuvei can provide nothing to SafeCharge. Though they’re lively within the house, Avgi informed Globes that the Canadian agency is rather more centered on point-of-sale know-how than his firm has been.

Furthermore, when addressing fears that the acquisition would possibly result in a wave of job losses, Avgi additionally particularly talked about know-how as a driving power behind the Nuvei deal.

“In offers like this the employees are generally a bit anxious,” he mentioned. “I want to make it very clear: one of many causes for the deal is the know-how, and so the event staff in Israel and Bulgaria must be assured that we will proceed to develop and develop new merchandise.”

Consolidation is coming

Apart from know-how, one other easier purpose for the deal is that the massive variety of gamers working within the funds house has in some ways made consolidation inevitable.

Simply this week, antitrust regulators within the European Union gave their approval to FIS’ $35 billion takeover of WorldPay. Like with the SafeCharge – Nuvei deal, the 2 firms weren’t lively in the identical verticals or jurisdictions.

And herein lies a easy – however costly – drawback for firms working in a saturated market. You’ll be able to spend a great deal of cash increasing into new markets and enterprise areas or you may spend a whole lot of money shopping for one other agency that’s already been profitable in these markets and enterprise areas.

Nuvei may have tried to increase into the verticals that SafeCharge is strongest in. However that may have possible value lots of of hundreds of thousands of {dollars} after which they might have needed to compete with SafeCharge, an already established participant with way more expertise than them in these particular enterprise areas.

Taking that into consideration, and contemplating that Nuvei have loads of cash – they’re paying money for SafeCharge – the management on the Canadian agency possible determined it might be easier to only purchase Sagi’s agency, reasonably than try to compete with it.

With that in thoughts, don’t be stunned in the event you see extra mergers within the close to future. Consolidation is coming for the funds world.

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