Adrian Durham, FNZ Group CEO, recently met Citywire to discuss FNZ's continued growth plans across the European and US markets. You can also access the interview on the Citywire website here.
FNZ is eyeing a blockbuster initial public offering (IPO) in three years if it continues to execute its growth plans across the European and US markets, its founder and CEO Adrian Durham has said.
In an exclusive interview with Citywire, Durham said if the private company continues to grow strongly it will prepare for a flotation, although there is not yet a detailed plan in place.
The platform technology giant is currently expanding its footprint into North America following a capital raise in February 2022 of $1.4bn (£1.1bn) from investors Canada Pension Plan Investment Board (CPP Investments) and private equity firm Motive Partners. This capital raise valued FNZ at more than $20bn.
‘The company has continued to grow very strongly,’ Durham said. ‘We have roughly $1.1bn of revenue, around $320m of Ebitda, and [are] still growing strongly. I think that was roughly 30% revenue growth on the previous year.
‘We’re continuing to grow very strongly as a private business. We have no immediate plans to change that but if we continue to execute our plan, not just in the US but in Europe, then in three years or so, but with no particular plan, we probably will IPO.’
When asked where the business would go public, Durham said his options would be mainland Europe, the UK or the US.
‘It depends on how the business evolves but I have no fixed view,’ he said. ‘The UK is still our biggest market, so London would be absolutely one of the possibilities.’
One source told Citywire New Model Adviser that Durham is targeting a valuation of $50bn, which would make the IPO one of the biggest ever for a fintech company. By comparison, semiconductor giant Arm was valued at $60bn when it listed on the Nasdaq last September.
A $50bn valuation would represent a return of two to three times for FNZ’s latest investors.
The business provides technology as a service to platforms along with outsourced operations and financial products that can be tailored to the needs of clients. Its model has been unique for most of the past 20 years as its competitors predominantly sold only software rather than a combination.
The company was founded by Durham in New Zealand in 2003 with backing from investment bank NZ Capital. While it has offices around the world, including a big base in Edinburgh, its parent company is in New Zealand.
FNZ entered the UK market in 2005 with a platform outsourcing contract with its first UK client, Standard Life Wrap.
‘We were lucky that back at the dawn of the very early platform market level, Standard Life, as it was originally known, selected FNZ. The UK was not part of any grand plan,’ Durham (pictured below) said.
‘And if you’d asked me then whether we would be a company anything like the size and scope we are today, I probably would have run away screaming in the opposite direction.’
FNZ has about 6,000 employees worldwide, administers more than $1.5tn of assets for over 20 million customers globally, and counts Abrdn, Lloyds, Quilter and Vanguard among its customers in the UK.
In 2018, former US vice president Al Gore’s private equity firm Generation Investment Management and Canadian institutional investor CDPQ acquired a majority stake in the company, followed by Singapore-based investment company Temasek in 2021.
Today, 67% of FNZ is owned by institutional investors including Temasek, CDPQ, CPP Investments, Summit Partners, Generation Investment Management and Motive Partners.
No investor has majority control. However, a third of the equity is owned by employees and governance is split equally between institutional shareholders and employees.
According to a spokesperson, in 2023 the business ‘completed over £100bn in major new migrations’.
FNZ has recently been cutting costs, making more than 240 redundancies across its global offices at the end of last year, with a previous round of job cuts last summer, NMA previously revealed.
North American plans
FNZ dominates the UK platform software market, dwarfing its competitors, and is now looking to expand in the US and Canadian markets, which offer much more opportunity for scale.
‘We’ve only been in North America for about 18 months and only really been actively trying to win customers for the past 12 months, but we’ve done some huge deals there,’ Durham said.
‘It’s already growing rapidly. North America accounts for about 10% of our total revenue on a go-forward basis. We’ve made a lot of fast progress there and see a lot of opportunity. It has a lot of challenges very similar to the UK from about 10 years ago that haven’t been solved. We’d see that as a huge opportunity. And we’re growing rapidly in that market.’