Last week, ABN AMRO announced that it was acquiring European-based neobrokerage BUX for an undisclosed amount. Earlier this year, BUX had been in talks to be acquired by N26, the German neobank, for a reported EUR 100mm. However, that deal fell through at the last moment(1). Last month, BUX announced 40% layoffs and a retreat from their UK expansion goals in a bid to get to profitability by the end of this year(2).
Reuters is reporting that BUX was burning approximately $17mm per year on a $2.7mm revenue base as of the end of 2022 with a client base of 500,000(3). Even with the company's desire to get to profitability this year, this may seem like some fancy math for a stand-alone these days. But in our view, if ABN chose to be opportunistic here, they had the means to do so. According to ABN AMRO's public filings, their wealth division produced approximateyly $685mm in the 4 quarters ending September 2023. They were also well positioned to be opportunistic since they were one of the earlier investors in BUX via it's venture capital arm and had the opportunity to work along side them in launching the first european fractional ETF trading facility.
This is perhaps the latest example of strategic acquirers using a "rent-to-own" approach to M&A where they "step-in" with a minority investment so they can better learn, evaluate, and innovate prior to a potential full acquisition. Last week, we also saw TMX use the same strategy in its acquisition of VettaFi. This potentially signals a new phase in venture funding, at least as it relates to WealthTech.
Link to press release: https://www.abnamro.com/en/news/abn-amro-to-acquire-bux
(1) Dennis Schwarz, Arno Schütze, Andreas Kröner, "N26 Wanted to Buy Dutch Broker Bux", Handlesblatt (Germany), Feb 15, 2023. Link.
(2) Jafar, Bilal, "Tencent-backed fintech BUX cuts 40% of staff in bid to turn profit", Financial News (London), Nov 14, 2023. Link.
(3) Stirling, Tobey, "ABN Amro buys loss-making online brokerage Bux", Retuers, Dec 14, 2023. Link.