Want to acquire an FX firm? Dipak Rastogi knows how – LeapRate Interview

CFH Group announced this morning that it has appointed former Citi Venture Captial executive Dipak Rastogi in order to embark on further FX industry consolidation.

In an exclusive interview with LeapRate, Mr. Rastogi outlines the important factors when looking to purchase companies and increase corporate presence through mergers and acquisitions.

Moving across to an FX brokerage service provider from Citi Venture Capital, how lucrative do you consider today’s FX industry to be for those wishing to invest in acquiring firms with values of between $5 and $30 million?

I have retired from Citi. While managing Citi Venture Capital International, we were investing in deals that range from $10mm to a few hundred million dollars equity investment per deal. It is important to know that I am joining CFH as a Board Director and not as an Operating Manager.

I have seen FX industry grow from less than a trillion dollars a day to several trillion dollars a day. With increasing globalization, there has been an exponential growth in trade as well as investment flows on a global basis. Efficient working of FX markets is key to facilitate such flows.

With increasing regulations and capital requirements, smaller firms have to come together and consolidate so that capital base is strengthened. I believe firms with revenues of $5mm-$30mm have an excellent opportunity to come together and develop a competitive platform that can withstand market shocks as well as be on a level playing field with some of the larger players. The FX market is large and is expected to continue to grow.

Last year there was a large amount of consolidation in the FX industry, with firms such as FXCM and CAIN Capital purchasing specialist technology providers, entire brokerages and client bases. Post SNB withdrawal of the 1.20 peg on EURCHF, is this dynamic likely to accelerate, with firms buying brokerages for low prices?

Yes, I believe the trend will continue. But I think it is likely to be more value accretive for smaller players to consolidate their operations.

What will CFH Group look for when looking to purchase brokerages, and how will you steer the firm into making the right choice of firms?

As a member of the Board, along with other Directors, we will provide the guidance that CFH Management needs to pull the right deals that would be value add for CFH as well as any partners we team up with in the process of consolidation.

The CFH Management has done a superb job to be at the point where they are. We will work together to drive the industry forward, with a focus on consolidation.

Does the decision to move toward purchasing brokerages represent a move by CFH Group into retail brokerage, or will the entities be run and operated as separate entities which are free to take liquidity and technology from any vendor?

It’s too early to say, but it would be a function of whatever is best for the various stakeholders – the customers, the management team and employees and the shareholders. We will also keep in mind the risk management and regulatory aspects.

Which regions are important as far as acquisitions are concerned?

FX is a global market that lives without borders but with important regulatory and legal parameters.

Do you think there is still viability in funding retail brokerages, or is it best to remain as a service provider and allow brokerages to operate their own businesses, thus reducing risk?

Remember, CFH is a B2B business. We aim to help them so that they can, in turn, help their local customers. Risk management will always be an important dimension.

Will CFH Group take the lead on execution model of brokerages that it invests in, and if so, which model will be employed?

Stay tuned as it’s too early to say. Moreover, FX and financial services as a whole is a dynamic market. The key is to be humble and nimble.

Institutional acquisitions – will they put CFH into rivalry with firms like GAIN Capital which has its own institutional offering?

Competition is healthy for the customers. I don’t call it rivalry. Our competitors are excellent at what they do.

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