NEC set to buy Swiss-based software firm Avaloq

Japan-based NEC Corp announced Monday that it will purchase Swiss software firm Avaloq in a 2.25 billion Swiss Francs ($2.2 billion) acquisition deal. Through this deal, NEC hopes to launch Avaloq into the global finance software market.

Avaloq currently stands as Europe’s leading service provider of financial asset management software. NEC will acquire the financial firm from Warburg Pincus, a private equity firm and Avaloq’s founder which holds a 45% stake in the firm.

Through the deal, NEC will be able to offer cloud services to financial institutions and governments through the merger, in addition to its biometrics and data analysis products.

NEC has spent the last 10 years improving and restructuring its unprofitable units that drag behind highly competitive rivals in the Asian market. Hence, selling its smartphone, personal computer, and semiconductor units. Instead, NEC will place more focus on the Japanese market where there has been a slow response to cloud financial services and products by financial institutions and governments.

“Japan is lagging behind in financial digitalization and this will be a big trend,” said Takashi Niino, Chief Executive of NEC.

In 2018, NEC purchased British IT services company Northgate Public Services, and in 2019 purchased Danish e-government services firm KMD in a $1 billion acquisition.

In a statement, Avaloq founder Francisco Fernandez said NEC shares his ambition for “Avaloq to continue to shape the future of the financial industry by continuing to invest heavily in R&D.”

The parent company of Avaloq, Warburg Pincus planned either a sale or listing of Avaloq in 2020, according to Reuters.

NEC received a $64.5 billion (approximately $560) million investment, recently. The investment was made by Japanese telecoms company Nippon Telegraph and Telephone (NTT) to support the company in its development of the fifth-generation (5G) wireless technology in Japan.

At the end of the June quarter, NEC had nearly 400 billion yen ($3.8 billion) in cash and cash equivalents. If necessary approvals and agreements are made, the NEC/Avaloq acquisition deal is expected to be completed by April 2021.