GAIN Capital acquisition of Galvan Research – $16.6 million

LeapRate Exclusive… LeapRate has learned that the acquisition by Gain Capital Holdings Inc (NYSE:GCAP) of UK-based CFD and FX advisory firm Galvan Research was done for cash consideration of $16.6 million.

The preliminary purchase price paid to Galvan’s owners when the deal closed in July was $9.7 million in cash. In addition, a contingent payment of $6.9 million is payable over a three year period subject to the achievement of specific financial and customer account targets.

Galvan had about $2.2 million in cash which it brought to Gain. Gain attributed $9.5 million of the purchase price to ‘Goodwill’.

Galvan Research provides individual investors with professional advice and trading recommendations across a wide range of markets, including CFDs, FX, individual equities, equity indices and other market sectors. Galvan generates revenue by earning a commission on each transaction made by its clients. Gain is using the people and assets it acquired from Galvan as a basis on which to build a comprehensive advisory service for its clients.

Despite the lofty purchase price, Gain Capital says that it expects the transaction to be immediately accretive to 2014 results. In Q3-2014 alone, Galvan contributed $2.3 million to revenue at Gain.

$16.6 million seems like a lot to pay for an advisory business. However the Galvan deal seems to be part of a wider Gain Capital strategy to stake out a major claim in the lucrative UK online trading market, where we understand Galvan did most of its business. Gain Capital also bought UK-based City Index for $118 million in October.

For a more complete list of M&A transactions in the Forex sector, as well as comp valuations of Forex M&A deals, see the all-new LeapRate Forex Industry Report for 2015.

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