Nordic Capital competed with 25 other bidders to secure a majority stake in banking software provider Zafin, the company’s co-founder and Chief Growth Officer Dinesh Krishnan said.

The Swedish private equity’s expertise in payments technology and global reach helped it stand out from other bidders, the executive told Mergermarket. Nordic Capital has a “very good understanding of the banking technology space,” Krishnan said.

Nordic Capital currently backs Sweden’s digital account-to-account payments provider Trustly and financial data software provider MacroBond, as well as UK-based provider of decision-making solutions for financial institutions ActiveViam, according to its website.

The PE firm’s familiarity with the European market should help Zafin accelerate its growth there, the co-founder noted. Zafin plans to hire local sales teams in Paris or Madrid to engage with “the big banks like Santander [BME:SAN], BNP Paribas [EPA:BNP], Deutsche Bank [ETR:DBK], which are not our customers today,” he said.

In February, Nordic Capital said it agreed to acquire a majority stake in Zafin for an undisclosed amount, buying out previous sponsors Kayne Partners, Vistara Growth and Accenture [NYSE:ACN]. Kayne Partners, the growth PE group of alternative investment firm Kayne Anderson Capital Advisors, invested in Zafin in 2016, when the company pivoted to a software-as-a-service business model, while Vancouver-based Vistara and Accenture joined in 2019.

Toronto’s Globe and Mail, citing a source familiar with the sector, reported that Nordic Capital valued the company at more than USD 500m based on annual revenues of USD 75m-USD 100m.

The deal followed a Goldman Sachs-led, two-round competitive process launched in 4Q23, noted Krishnan. “We talked to our existing minority investors and said: ‘Let’s go out and find the right partner who can help Zafin scale the business and seize this market opportunity,’” he said.

Early on Zafin and Goldman engaged in talks with potential strategic investors but soon thereafter prioritized PE bidders “as the key for us was about timing,” the co-founder said. “While there was a great amount of interest [from strategic investors], they also expressed concern about meeting our timelines.”

The company maintains a relationship with some of those strategic investors, including some which are commercial partners, leaving the door open for a potential sale in the next three to five years, Krishnan said.

Growth plans

With Nordic Capital’s backing, Zafin wants to accelerate its organic growth, said Krishnan, noting that the company currently serves only 40 of the about 300 banks worth more than USD 50bn and only a fraction of the thousands of regional banks. “The market opportunity in terms of addressable market for us is significant.”

The company plans to continue growing at a 50% rate for the next three to five years as it has been doing for the last three to four years, he said. Its headcount of about 650 employees is expected to grow to 700 in the next 12 to 18 months, he added.

Krishnan declined to provide financial metrics.

In terms of M&A, the company will remain on the lookout for opportunistic acquisitions, he said, adding that one area of focus is data analytics.

In early 2022, Zafin acquired FINCAD, a Vancouver-based provider of pricing and risk analytics of financial derivatives and fixed income products, for an undisclosed amount. Just over a year later it sold it to Numerix.

Asked about exit opportunities, Krishnan noted that a couple of years back Zafin evaluated launching an initial public offering but abandoned the idea because of market conditions, a strategy that could be revived in three to five years. “The options could definitively be an IPO listing on the” Toronto Stock Exchange or potential sale to a strategic, he said.

Krishnan and the company’s two other co-founders – Chief Operating Officer Anugopal Venugopalan and CEO Al Karim Somji – hold a minority stake in the business.