LeapRate Exclusive Interview… While it is still early in 2018, clearly the Deal of the Year so far in the world of FX brokerage is the sale of OANDA to private equity firm CVC Capital Partners.
How did the deal come about?
What does the acquisition mean for the company, and its future?
We’re pleased to speak today to one of the architects of the transaction, OANDA CEO Vatsa Narasimha. Here is what he had to say, exclusively at LeapRate.
LR: Hi Vatsa, and thanks for joining us today. I’m sure our readers would like to hear more about how the deal with CVC came about. Any insight or anecdotes you can share?
Vatsa: 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. Many of our existing shareholders have been with the business for more than a decade now, which is a long time for any investor. We’ve received several inbound enquiries over the years, however given the company was doing well, our shareholders weren’t ready to sell.
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. A few months back we began discussions with CVC Capital – one of the world’s leading private equity and investment advisory firms – which made perfect sense to the executive committee not only because they already have a deep-seated knowledge of the industry, but they also understand our strategy and vision. As such, we felt they are were a great fit for OANDA.
LR: It seems an interesting time for a private equity firm to get into the FX sector – competition is as high and fierce as it has ever been, regulators are tightening the rules… Where do you see the opportunities?
Vatsa: The competitive landscape has changed considerably over the last decade, and today the boundaries between wholesale market participants and the retail FX market are becoming increasingly blurred. As a result, I believe a host of opportunities remain in the marketplace as a result of technology, and we’ll continue to disrupt things in order to create a more fair and transparent market for our clients.
Today, OANDA combines cutting-edge trading technology and institutional-grade execution across a wide range of asset classes, however, the company began life in 1996 as a tech firm, built on the belief that technology should be used to open up the financial markets, creating fair access for everyone. Over the years, we’ve worked hard to transform the foreign exchange industry by combining a passion for innovation and technology, and we’ll continue to look for innovative new ways we can transform the FX industry in the future.
In terms of the trading business, we’ll continue to invest heavily in our institutional-grade trading platform, offering a wider range of asset classes and introducing new pricing models that will help our clients be more successful. And we’ll also continue to build on the foundations of OANDA Rates and our payments business, introducing a wider range of corporate and consumer solutions that will make it easier than ever to access the markets.
LR: From the CEO’s chair, what changes now with a global, multi-billion-dollar firm like CVC behind OANDA?
Vatsa: While CVC Capital already has a wealth of experience in our industry sector, they are completely behind the growth strategy we have defined for the coming years. They recognise the potential OANDA has to further grow in the trading, currency data and payments space and their goal is simply to drive sustainable profitable growth for the business. OANDA has demonstrated strong historic growth with CAGR at more than 25% since 2015 and we already have the cost-base infrastructure in place to support further revenue growth. As such, our combined focus is to accelerate top-line revenue growth around the world.
Given this, there will be no immediate change to the organisational structure of OANDA, and I will continue to lead the organisation into the future. We will continue to implement the same vision and strategy as planned, and our clients will still to be able to trade on our award-winning platform. The key difference lies in the fact that the acquisition will open up a wide range of opportunities in terms of driving growth around the world. This is a very exciting stage in our history because the new ownership will enable us to execute our vision for both organic and inorganic growth in the coming years.
LR: We’ve seen record results recently at some leading brokers (Plus500 and IG come to mind) driven at least in part by crypto trading. What is OANDA’s approach to cryptocurrencies, and managing crypto volatility risk as a broker?
Vatsa: We believe cryptocurrencies continue to offer a significant opportunity for OANDA, and we’re looking to launch our own cryptocurrency product, which will roll out in stages around the world where permitted. Our crypto offering will enable clients to trade Bitcoin and Ethereum as a CFD on one of the fastest execution engines in the world. However, we are also looking to introduce other new products, including single-stock CFDs. Our goal is to offer a comprehensive range of asset classes that will enable our clients to diversify their portfolio and mitigate risk, and while I can’t share a specific timeline at this stage, it’s safe to say these products will be available with OANDA in the near future.
LR: What else can we expect to hear from OANDA in the coming months?
Vatsa: Given the deal has just been signed, it’s too early to provide definitive answers to this question, however our focus will be on accelerating top-line revenue growth through both organic and inorganic growth around the world. Looking to the future, we’ll continue to invest heavily in Singapore, Southeast Asia, Australia and Japan within the Asia-Pacific region, however, we’ll also be looking to grow elsewhere in the world, most notably in some of the larger European markets. As part of this, we are open to acquiring other companies in order to help us build our business around the world.