LeapRate Exclusive Interview… AvaTrade can easily be called one of the quiet success stories of the Retail Forex sector. Many in the industry were taken a little by surprise when AvaTrade’s financials were revealed, exclusively by LeapRate, in some filings made by Playtech PLC (LON:PTEC) soon after Playtech announced its planned $105 million acquisition of AvaTrade.
AvaTrade reported 2014 Revenue of $69.9 million, with EBITDA of $24.6 million. And we believe that 2015 was even better.
But that, of course, is all history now. The Playtech-AvaTrade deal was canceled after it became clear that the Central Bank of Ireland, AvaTrade’s regulator, was not going to approve the transaction.
So where does that leave AvaTrade heading into 2016?
LeapRate is pleased to speak today with AvaTrade Group CEO Daire Ferguson on the Playtech deal, and what lies ahead for the company in the new year.
LR: Hi Daire, and thanks for joining us today. It must have been a very interesting few months for you. We’d love to hear more about how the Playtech deal first came about, and what life was like at AvaTrade during the nearly five months while the acquisition was in limbo.
Daire: Hi Gerald, Many thanks for having me in with the LeapRate team. As you can imagine, it’s been a challenging and busy 2015 – particularly the last 7-8 months since the initial rumours of the acquisition started circulating. As with any potential takeover – there is always an element of uncertainty of what may happen in the future – with speculation rife amongst external media and internally with staff alike.
The management of AvaTrade, at all times, was very transparent with all information pertaining to the acquisition – in order to assuage any concerns for staff. As we knew that there was no certainty the deal would close, the firm continued to conduct business as usual on a day-to-day basis – and as a result 2015 was a very profitable year, which will help us build into 2016 and onward.
LR: We understand that a lot of people in senior positions had left AvaTrade after the acquisition was announced (including much of the marketing and affiliates teams), assuming of course that they would be redundant after the acquisition went through. Has AvaTrade had to heavily recruit again now that it looks like you’ll be remaining independent?
Daire: No, while there is always some natural turnover there were no major staff changes as a result of the acquisition process. Simultaneously, we did do some internal restructuring at all levels – but this was all business driven and included hiring new positions and bringing in better people. Overall – in the last 12-15 months we hired many talented staff as part of a revamp of the AvaTrade brand – with a new marketing direction and prominent investment into R&D. This included a number of key senior management positions who have all stayed with AvaTrade – and wish to invest in the standalone AvaTrade brand – which I and all the global staff collectively believe in very strongly.
LR: There has been a lot of speculation as to why the CBI didn’t approve the acquisition by Playtech, much of it centered on the CBI just not being comfortable with a gaming related company owning a regulated financial concern such as AvaTrade. Can you give us any more insight into what happened?
Daire: AvaTrade was essentially not privy to the application process by Playtech and we do not wish to speculate – as there are plenty of people who have already done this. What we do know and can state publicly is that the rejection had nothing to do with AvaTrade and AvaTrade enjoyed a very good relationship with the CBI and continues to do so today. The CBI is a very strong regulator which takes its responsibilities very seriously and is completely independent in its decision making process.
LR: With the whole Playtech episode behind you, what do see for AvaTrade going forward? How will this affect your strategy?
Daire: As Einstein said – ‘In the middle of difficulty lies opportunity’ – and we certainly look at this as a great opportunity for AvaTrade to refocus on what made us such a successful company over the last 10 years. We were pioneers of the industry and fully intend to continue in this vain into the future.
We have initiated a number of key projects – building on new customer experience, developing stronger system integration, expanding in new marketing techniques and of course emphasizing our mobile technology which we and everyone sees as critical to the the future to the industry.
On a strategic level, we have a number of objectives in mind for future expansion.
We have recently opened up a number of new representative offices globally – both in Europe and Africa – with further offices to follow in these jurisdictions and similarly in the Middle East – which continues to be a key market for AvaTrade as it has been historically and for will be in the future.
We also envisage China to be a major factor in our future growth and have recently established new structures and are currently in midst of a very serious expansion in both Shanghai and Beijing to capitalize on our existing Asia-Pac business – and more importantly to drive this great market forward.
AvaTrade also has the leading Affiliate & White Label programme bar none – and will continue to work with serious partners who want to succeed in this industry – and wish to work with an established company such as AvaTrade – and of course we will guide and assist these partners from start to finish in this process.
On a more macro level – we want to be very clear that AvaTrade itself is an acquirer – and we are actively looking for acquisitions and client books – and openly welcome any active sellers of same. We have done in the past a number of such deals and are capable of closing deals like this in a matter of weeks.
LR: It has been a full year since the Swiss Franc spike of January 2015. What lessons did AvaTrade take from that episode? Are you doing anything differently today because of it? Are your clients?
Daire: This Black Swan event was obviously unprecedented in the market and has been well digested at this stage. These are rare and occurrences – but realistically should not be differentiated from such events as fat-finger errors (Nasdaq) or natural disasters (earthquakes Japan). In one sense – perhaps it is the regulators or central banks that can learn from these events – and be more responsible with respect to how their actions can impact – not just a market – but whole industries.
Certainly the after effects were felt by both firms and clients alike – but the industry moved on as it has always done. AvaTrade has excellent risk management systems – with a broad mixture of macro and micro hedging techniques and while we took some losses as a result – the net effect overall to the firm was negligible.
We always encourage our clients to diversify their portfolios for both short term and long term goals and develop strategies to minimize the effects of such events in the future.
LR: What challenges do you see ahead for the Retail Forex industry as a whole as we head into 2016?
Daire: The major challenges will most likely come with stricter and higher costs for regulation. Regulation is of course fundamental to a stable and progressive industry – but nonetheless it must be balanced to allow the industry to mature naturally without forcing changes that have little or no benefit for the participants – on both sides of the fence.
As a result of this – we may continue to see consolidation within the industry as a whole and with AvaTrade being so highly regulated – in numerous jurisdictions across Europe, Asia, Africa, Australia and BVI – is one of the primary reasons AvaTrade – with our expertise in compliance & implementing regulatory requirements – coupled with a strong capital base – will position itself as an acquirer into the future.