• Currencies Direct, Moneycorp could be consolidation plays for new PE owner
• Company also screens smaller brokers for acquisition opportunities

iBanFirst, a Belgian financial services platform for small and medium-sized enterprises (SMEs), is screening the market for M&A opportunities in the UK, founder and CEO Pierre-Antoine Dusoulier told Mergermarket.

Targets could be large legacy forex brokers with EUR 50m and more in revenues, Dusoulier said. These companies are mostly private equity (PE)-owned and a deal involving one of these large players would require iBanFirst to raise additional equity or debt funding to supplement its own cash, he said.

At the moment, valuations of these companies are inflated, but iBanFirst is receptive to discussions, the executive said.

The largest PE-backed brokers in the UK are Currencies Direct, which is backed by Blackstone [NYSE: BX], Corsair Capital and Palamon Capital Partners; and Bridgepoint-backed Moneycorp, Dusoulier said.

Currencies Direct has a score of 33 out of 100 according to Mergermarket‘s Likely to Exit (LTE) predictive algorithm*. When the company raised GBP 140m (EUR 163m) in March 2022, it had reported revenues of GBP 105m and GBP 43m in EBITDA for the 12 months ending January 2022.

Meanwhile, Bridgepoint was finalising preparations for a sale of Moneycorp last year, as reported by Mergermarket.  In 2023, Moneycorp was being marketed off EBITDA of GBP 80m, as reported. Its valuation could be in the range of 12x-13x EBITDA, as reported at the time.

The market of large brokers is ripe for consolidation, with iBanFirst and its European competitors vying to be dominant on the market, while US-based Fleetcor [NYSE:CPAY] has been active in deal-making, Dusoulier said. Fleetcor executive Steve Greene said the company expects a ramp-up this year to historical M&A levels, as reported.

iBanFirst has dominant positions in the French and German markets, and strong positions in the Netherlands, Belgium, Spain, Italy, and Eastern Europe, and 10 offices across continental Europe, Dusoulier said. With one or two large acquisitions, iBanFirst could become the number one platform in Europe, he said.

One option would be for a large PE firm to acquire iBanFirst and use it to consolidate legacy players in the space, who do not have the technology to scale, Dusoulier said. Since Brexit, it has been challenging for the large PE-backed UK-based forex brokers to break into the continental European market, he said.

One of these companies could benefit from merging with iBanFirst and its European competitors to build its presence in continental Europe, the executive said.

Marlin Equity has a 51% stake in iBanFirst, that it paid approximately EUR 200m for in 2021, Dusoulier said. It received interest from potential buyers, other PE firms, in its iBanFirst stake last year, he said.

Marlin Equity considered at that point selling half its stake in the company, but valuation was a sticking point, Dusoulier said. The fund was weighing its options in November 2023 and saw the business having a value of EUR 800m, Mergermarket reported.

iBanFirst is sustaining high levels of growth, and even if market conditions are not what they were in 2021 or 2022, in time its sponsor will find a buyer at the right valuation, Dusoulier said. Marlin Equity targets a 2.5x to 3x return on its initial investment, he said.

Marlin Equity did not immediately respond to a request for comment.

Track record for deals

iBanFirst acquired UK-based Cornhill in 2022, and Dutch NBWM and German Forexfix in 2019, and it aims for a faster pace of M&A in coming years, Dusoulier said. The company is better equipped for due diligence processes now because its majority owner Marlin Equity helps with the extensive scouting process, he said.

The company has been able to sustain the high growth of its venture capital (VC)-backed days and achieve profitability, while transitioning to being primarily PE-backed, Dusoulier said. When Marlin Equity invested in iBanFirst in 2021, the company was well on track to achieve profitability, and achieved breakeven in summer last year, he said.

In 2025, the company targets revenues of EUR 100m, and is aiming for revenue growth of 40% along with an EBITDA margin of 10% in 2024 and 2025, Dusoulier said.

As well as larger deals, iBanFirst is also targeting small brokers with revenues of EUR 1m-EUR 10m and is currently evaluating a pipeline of five such targets, Dusoulier said. These smaller targets, of which there are around 50 in the UK, are typically EBITDA-positive, have a strong client base, but lack the technology to scale their businesses, he said.

iBanFirst can onboard the clients of smaller targets onto its platform to better serve and grow these businesses by upselling and cross-selling products, Dusoulier said.

Valuations of small targets average 2x sales, the executive said, with valuations going higher if the broker has higher-quality revenue, with a larger percentage from B2B customers, he said.

Valuations of the larger PE-owned brokers are harder to agree on, Dusoulier said. With a strong management team, high growth of 20%-40%, and the presence of a tech stack to acquire, valuations of large targets can go higher than 2x sales, he said.