NEC Buying Avaloq For $2.2 Billion

By Amit Chowdhry • Oct 6, 2020
  • NEC Corporation (TSE: 6701) announced this week it is buying Switzerland-based banking software company Avaloq Group AG for 2.05 billion Swiss francs

NEC Corporation (TSE: 6701) announced this week it is buying Switzerland-based banking software company Avaloq Group AG for 2.05 billion Swiss francs ($2.2 billion). This acquisition will provide NEC with digital finance software and domain knowledge as it enters into the field globally and strengthens its business in the digital government field. And the deal is expected to be completed by April 2021, upon the confirmation of necessary procedures and approvals for each organization.

NEC is focused on Solutions for Society businesses that utilize the strengths of ICT to enhance social infrastructure. And NEC’s biometric and AI technologies are driving the expansion of business globally, mainly in the digital government field, and help in promoting safe, secure, fair, and efficient communities. Plus NEC is also now shifting more attention towards SaaS business models that utilize software capable of being horizontally deployed.

Avaloq is known as a global leader in digital banking solutions and is at the forefront of financial DX as a software developer for financial institutions largely centered in Switzerland, but reaching across over 150 customers in 30 countries worldwide. And Avaloq’s business growth is partially driven by recurring business from the provision of software as a service (SaaS) and business process as a service (BPaaS) for wealth management and other applications as it holds the top market share in wealth management software within Europe and Asia Pacific. In recent years, Avaloq has worked with FinTech startups and other partners to aggressively promote digitization through AI, blockchain, and other technologies as part of capitalizing on new service needs brought on by open banking, particularly in Europe.

In response to the slowing growth in conventional services and advances in regulatory reforms like the shift to open banking, the financial industry is working to acquire new sources of revenue by creating services that utilize digital technologies and the utilization of software is expanding in preparation for rapid introduction of these services. Plus there is a growing momentum toward achieving more equitable and efficient civil services through cooperation between government and finance — which is based on digital IDs and digital tokens.

The digitization of the financial industry is expected to have a broader impact on the sustainable development of the digital economy and society. And NEC will acquire software and domain knowledge in the digital finance field through the acquisition of Avaloq and enter this field globally while strengthening its business in the digital government field.

NEC is also aiming to expand its business and improve profitability, mainly in the digital government and digital finance areas by globally developing SaaS business models that utilize software and technologies from throughout the NEC Group.

KEY QUOTES:

“NEC will be placing great importance on building long-term relationships with Avaloq and its customers, and aims to create new solutions that combine Avaloq’s software with NEC’s cutting-edge technologies, such as its brand of biometric authentication solutions, “Bio-Idiom,” the company’s AI technology brand, “NEC the WISE,” and its innovative blockchain technologies. NEC will also promote global sales expansion of Avaloq’s software by taking advantage of NEC Group sales channels, including KMD, a leading European software and IT services provider that NEC acquired in February 2019.”
— Takashi Niino, President and CEO, NEC Corporation

“The Avaloq team is delighted to be joining the NEC Group, a highly trusted and well-respected company with a long heritage, which will help further enlarge our geographical footprint across the globe. Due to very similar values of professionalism, reliability, quality and excellent service for clients with a focus on precision, we firmly believe that this union will be a successful one for all involved and we are looking forward to an exciting and fruitful cooperation. The whole Group Executive Board at Avaloq is committed to driving forward our growth strategy and we are very glad to have a strong partner on our side who supports our long-term vision and offers us continuity, stability and an exciting future of accelerated growth in new markets. With NEC, Avaloq found a perfect new home to continue our success story of serving our clients with solutions that make their lives simpler in an ever more complex world.”
— Juerg Hunziker, CEO of Avaloq