NEC will acquire unlisted Avaloq, Europe’s top provider of financial asset management software, from Avaloq’s founder and employees and private equity firm Warburg Pincus, which has a 45% stake and engineered the sale.
Avaloq, whose customers include Deutsche Bank and HSBC, reported sales of 610 million Swiss francs ($664 million) last year, 70% of which came from Europe.
The deal will allow NEC to offer cloud services acquired through the merger combined with its own biometrics and data analysis products to financial institutions and governments as digitalisation gathers pace.
It has spent the last decade restructuring unprofitable units that lost business to price-competitive Asian rivals, selling its semiconductor, personal computer and smartphone units.
NEC said it will target Japan, where financial institutions have been slow to move online and new Prime Minister Yoshihide Suga has pledged to modernise outdated government systems. “Japan is lagging in financial digitalisation and this will be a big trend,” Chief Executive Takashi Niino told a news briefing.
The deal follows NEC’s 2018 acquisition of British IT services company Northgate Public Services, whose customers include London’s Metropolitan Police, and 2019 purchase of Danish e-government services firm KMD for more than $1 billion.
NEC “share my ambition for Avaloq to continue to shape the future of the financial industry by continuing to invest heavily in R&D,” Avaloq founder Francisco Fernandez said in a statement.
Warburg Pincus had been targeting a 2020 sale or listing of Avaloq, Reuters reported last year.
NEC recently received a 64.5 billion yen ($560 million) investment from Japanese telecoms company Nippon Telegraph and Telephone (NTT) to beef up its efforts to develop fifth-generation (5G) wireless technologies.
NEC held around 400 billion yen ($3.8 billion) in cash and cash equivalents at the end of June. The deal is expected to be completed by April 2021 after necessary approvals.