Euronext cautious on Allfunds acquisition, deal by no means certain

The group could withdraw its offer rather than enter into a bidding war, sources close to the deal tell The TRADE. 

Stephane Boujnah

Last week, Euronext confirmed an indicative offer for the Spanish wealthtech platform Allfunds, after media speculation forced its hand. An acquisition would make sense in terms of both revenue and diversification – if completed, the deal would see Allfunds account for more than a quarter of the exchange group’s bottom line.  

Read More – Euronext in talks to buy Allfunds, conditional on shareholder approval 

In addition, Allfunds recently created two new business lines: Allfunds Tech Solutions and a new data and analytics offering, which would strengthen Euronext’s tech and data focus – unlike other exchange groups, Euronext remains heavily exchange-focused, with equities still making up around 20% of its bottom line. However, the group is already expanding its horizons, with the Borsa Italiana acquisition and other initiatives driving its Advanced Data Services revenue up to €212.1 million in 2022, an increase of 15.1% on the previous year.  

In a conversation with The TRADE earlier this year, Euronext CEO Stephane Boujnah confirmed that: “We’re looking at potential new avenues in post-trade, in FX, in energy, in corporate services, in data, to take the company to the next level.”  

Discussing why Euronext has been perhaps slower to expand out into the data and technology space than some of its peers, Boujnah explained: “Most of the players that have diversified before us did so because they reached the conclusion that cash equity trading and listing is less profitable or scalable or has less organic growth than other activities. For all sorts of reasons, I think we have on our side demonstrated that cash equity trading can be a very profitable business and can bring a decent strong return. But we need to diversify into other asset classes now.” 

Read More – Fireside Friday with… Euronext’s Stephane Boujnah  

An Allfunds acquisition would certainly increase the group’s financial clout – the firm posted H1 revenues of €259 million in 2022, an increase of 5% year-on-year and representing around 34% (comparatively) of Euronext’s own H1 revenues (around €770 million in total for Q1 and Q2). Allfunds has over 3,000 fund houses on its books already, which would mark another attractive string to the Euronext bow. The firm listed on Euronext Amsterdam in April 2021 in a successful IPO that subsequently saw its assets under management jump 29% for the year to reach around €1.5 trillion.  

But sources familiar with the matter tell The TRADE that although the acquisition is attractive, Euronext will only proceed if the price is right and the terms meet its stringent M&A requirements. Should Allfunds receive a competing offer, and/or a bidding war kicks off, Euronext may be prepared to walk away rather than exceed its price objectives.  

It’s not an empty threat either – the group did the same thing in the battle for Bolsas y Mercados Españoles (BME), operator of the Spanish stock exchanges, in 2020: leaving the group to be acquired in an all-cash offer of around €2.5 billion from SIX Group. 

“We have a clear M&A discipline – we do deals when we can deliver a return on capital employed above our cost of capital after three to five years,” said Boujnah. “So far, we have always been in a position to achieve this return. In terms of the price of the SIX bid, we could not meet our target returns at that price.”  

It remains to be seen whether the latest Allfunds deal is able to meet the same requirements.