Vista Equity Partners is looking to sell a minority stake in its UK fintech portfolio company Finastra, said four sources familiar with the matter.
The stake sale comes more than two years after Vista formed Finastra through the merger of its portfolio company Misys with D+H, a Canadian fintech group that the financial sponsor acquired in 2017 for CAD 4.8bn.
London-based Finastra has been testing the market for some time, one of the sources and another source familiar said. They added that a stake sale is more likely than a complete sale of Finastra, in part due to the size of the company. Finastra raised over USD 5.8bn in debt to support the Misys and D+H merger.
S&P downgraded Finastra in March 2018 on expectations that revenue would decline as the company moved its Misys customers to a subscription revenue model. The credit rating agency said that it projected that Finastra would generate around USD 2bn in pro forma revenue for fiscal 2018. In a non-public September 2019 update, Moody’s said Finastra has seen “good performance.”
This May, Finastra appointed Mark Miller as CFO. The executive previously worked for two Vista portfolio companies that the sponsor has sold, Active Network and Marketo.
Finastra offers a number of financial software products, ranging from core banking systems to payments and treasury management. The company says that it serves 90 of the world’s top 100 banks.
The landscape of core banking software is undergoing significant changes this year, as two of Finastra’s major competitors in the US, Fiserv and FIS, have made transformational acquisitions to substantially increase their payments technology and merchant services capabilities.
Finastra’s competitor in Europe, Switzerland-based banking software company Temenos, is actively moving into the US with the USD 559m acquisition of Kony in August. Austin-based Kony provides digital banking solutions.
The space is also seeing active innovation from nimble banking technology players, who claim to have a unique competitive edge against the largest players by providing cloud-native solutions, this news service has previously reported.
Vista abandoned an attempt in October 2016 to take Misys public in the UK due to volatile markets, according to media reports at the time. A stake sale could pave the way for a future IPO in the US or sale of Finastra, one of the sources said.
Finastra and Vista declined to comment.