It is the biggest purchase of a fintech startup to date. And one of the big bets in this sector after years of investments in international companies. Santander has put on the table just over 400 million euros to get 50.1% of the Spanish platform specialized in currency exchange Ebury. The technology company, based in London, Madrid and Malaga, maintains its plans despite this renowned landing: it seeks the IPO in the medium term.
Santander surprised last week with the announcement: it was executing an investment with which it allocated about 80 million euros to the change in a capital increase to finance the growth and 325 million to repurchase titles to founders and funds that made up the Ebury shareholding. With this disbursement, the company wanted to save time and investment in own resources to launch something similar from scratch, according to an interview with La Information, the general director of the startup in Spain, Luis Azofra, who landed in his position in the August from BBVA.
That announcement was the culmination of months of negotiations and an important ‘due diligence’ not only to investigate the business, but in the technological area. Ebury not only held talks with the bank chaired by Ana Botín, but also with other investment funds with which he was studying a possible capital increase. It was a parallel process that led to the signing with the Spanish entity. From the startup they understood that it was their best option.
About the agreement
That agreement will not only allow Ebury to continue operating independently with its own brand in the markets in which it is present – and to make a partial cash out among all shareholders, including the founders. As they explain from the startup, they will also have this autonomy in the management – in the council there is no majority of the bank. They will have it after a business plan is approved by both parties for the next few years in which the expansion roadmap will be designed jointly and by consensus, especially in Latin America. The reason? According to the director in Spain, they have understood that this freedom will allow a better development of the project than if they take full control of the day to day. Yes, there will be a member on the board of directors that is Sergio Rial, CEO of Santander Brasil.
And that independence also allows them to keep the IPO plans that were already on the table in the company. In fact, Azofra points out that this is the option that has the most points for the next five years. That roadmap is what they work with, although Santander can always keep the ace in the sleeve to acquire the rest of the shares. Be that as it may, the only bank on the horizon is what it has promised its investors: a return on invested capital (more than 400 million euros) above 25% in these five years until 2024.
Competition in Europe… alliance in Latin America
Before that time comes, Ebury and Santander must shape that business plan. Beyond the details, there is a maxim, according to Azofra, that will remain: there will be competition. That is, both will ‘fight’ in the markets in which they are present today together: Spain, Poland and the United Kingdom. “We will continue to compete,” warns the manager, who insists that it is the best way to maximize the company’s value. And in the rest? There will be a union. Specifically, it is about Latin America, which is the market that the two want to attack in the coming quarters.
That business plan should also contain the keys on how it will operate there, where they will go hand in hand. And everything will depend mainly on local regulation in the sector. “Except in Mexico, there is no specific regulation for fintech in other countries,” adds Azofra. The most logical thing is that subsidiaries are created in the different markets with which to comply with all local regulations to operate. In this task, Santander’s support will be fundamental.
Something is decisive
The competition that both parties will maintain will also shift to something decisive: the provision of liquidity for the Ebury platform. From the company they insist that the agreement does not give an exclusivity to Banco Santander for all these contracts, but that they can go to other entities to manage it. “It’s positive and that will make us all better”, says the former head of FX Sales at BBVA.
All these are the ingredients of the largest operation of a Spanish ‘fintech’ startup. Ebury will continue trying to step on the accelerator to raise the growth rate that has been achieved in recent years, which has been around 40%. He will do it with Santander, but with full powers to operate and with the stock market still as his preferred option.
Also published on Medium.