Private equity groups Astorg and Bridgepoint acquired majority stakes of Fenergo in a $600 million deal, giving it a $1.165 billion valuation, per The Irish Times. Fenergo offers regulatory compliance software to help financial institutions (FIs) remove friction from the digital client onboarding process while complying with know-your-customer (KYC) and anti-money laundering (AML) requirements.
The acquisition follows a surge in demand for Fenergo’s regulatory compliance solution, and increases its IPO’s chances of success. Restricted branch access last year drove more customers to open accounts online, but FIs’ need to carry out KYC and AML checks added friction to the digital onboarding experience. To avoid customer churn, they’ve been ramping up investments in digital compliance solutions, boosting demand for the likes of Fenergo. In the financial year ending March 2021, Fenergo’s revenues increased to $107 million, up from $78.5 million in 2019, and it now services 26 of the top 50 FIs worldwide, per The Irish Times. Looking ahead, its newly acquired unicorn status from the private equity sale could help Fenergo make its planned IPO a success and enhance its brand awareness among global FIs.
The latest capital injection will help Fenergo quickly broaden its product suite with acquisitions to better reach new clients and sharpen its competitive edge. There are still a whole host of FIs that need faster digital ID solutions: Only 55% of US banks offer accounts that can be opened and funded in a day, while almost one-third of global wealth management firms take over four weeks to onboard new clients. Thanks to the deal, Fenergo can “grow fast by aggressively acquiring businesses to complement what they do,” per CEO Marc Murphy. This way, Fenergo can quickly broaden its product suite and improve its tech stack to score new clients. Strategic acquisitions could also enhance Fenergo’s value proposition in comparison to its large and fast-growing competitors: Digital ID provider Onfido, for example, reported a 93% year-over-year increase in revenues for Q1.