Notion Capital Partner, Jos White, first invested in Currencycloud in 2011. Almost ten years, in December 2021, the company was acquired by Visa for just shy of $1BN. In this article Mike Laven, CEO of Currencycloud, shares his “exiteering” experience with Notion’s Stephen Millard.
We started to think about the end game from pretty much day one, but it was never going to be an IPO.
I've been around the block a couple of times, and I never believed Currencycloud would be a public company. If it's not going to be a public company then, ultimately, it's going to be acquired. It wasn’t a conscious decision to look for an exit, but it was always clear to me that we would not go public.
Why did I believe that? I've run a public company before and there's a big difference between a good company and a good public company. First of all, there's a scale issue - you have to be large enough to be able to survive a bad quarter and it takes a long time to achieve that kind of scale.
Secondly, I believe you need to have a diversified business to succeed as a public company, but at Currencycloud we have a very focused business which is subject to buffeting by externalities. If, for example, sanctions on Russia ruin the financial markets, that could ruin a quarter for us; in the financial world and the public company world, there's no such thing as one bad quarter. It’s not to say we would be a bad company - we could be a great company, but we could have a terrible quarter because of an externality and our stock might never recover.
So in other words, to be a really good public company, you have to go for big scale and you need a business that is diversified.
We always believed we would be acquired for a multiple of our revenue that was based on technology not finance
I had a theory from the beginning, which I was very clear about with the board, that we would be acquired for a multiple of our revenue based on our technology. I believed we'd be acquired by someone who had millions and millions of customers, for whom we could provide more value than what would be reflected in the actual numbers of our company.
As an exit strategy, that was always in the back of my mind.
I was never looking for a liquidity event, I was not looking to sell the company - I never really had any of that on my mind, even until late in our discussions with Visa. But I had a concept of how this company would achieve liquidity at some point in the future and that is how I looked at the entrepreneurial journey of Currencycloud.
Companies are not sold, they're bought.
If you are going to be bought (not sold) it had better be by somebody you know. If not, it's going to be an auction and you may have no idea where you end up.
The other thing that was incredibly important to me is the 500 people we had, all of whom had worked hard to build the value in the company, and they deserved a good home. I wouldn't wish a bank on them, that would be deadly for everyone and, as we are a fintech, that narrowed the market quite considerably, the universe of acceptable buyers wasn't that great.
As your revenue goes up, the universe of who can buy you gets smaller. In the end, we chose Visa as much as they chose us. Visa is a great company and everybody we met at every level is decent and they have an employee centric culture and values.
Build relationships with companies that could acquire you
Visa came into our D round in 2019, so we knew them well.
There were two trigger events for Visa’s offer to acquire us. The first was our next fundraising round. This valued the company beyond what Visa would want to pay to acquire us. But I think more important than that, Visa had partnered with us over a two year period to develop a complementary product they needed called “Point of Sale FX” and was first rolled out to EToro and now has a number of other users. It was a big project and we delivered it in the first quarter of 2021. What’s more, it was high quality, it worked and they saw the processes by which we delivered. That gave Visa confidence in us and our technology. It was that confidence, coupled with the fact that the valuation was going up, that made them feel comfortable to give me a call to say “let's talk about how we're going to do this: owning 100% of you, not 15% or 8%”. The combination of those two factors really had an impact.
In 2021 the CFO of Visa called me. I'd never met him before but we had a chat and he said, “we want to enter into a discussion to buy the company outright.” At that stage we engaged Financial Technology Partners (FTP) to help us as an advisor, as they knew us very well. There was some debate around the board whether we should have a different advisor, but they'd done our fundraising before, they knew our segment and they knew the company really well.
We had one round of negotiation and we couldn’t agree on a price so it all broke off and we went back to our Series F fundraising.
However, over a month later, I rang back to ask whether we should give it another go. We reengaged and came to an offer that was acceptable. That's now a public £700 million and a very clean number.
Your advisors are important, but the execs do all the work
FTP counselled us but the company has to do all the work. There could have been a slightly different negotiation strategy that might have pushed the price up a little bit with some different kinds of knowledge but, in general, the deal was the deal we wanted. Like any deal, there are heart stopping moments along the way especially as we're a regulated company. For example, Visa had to go through various competition authorities and antitrust filings. When the deal was signed , in July 2021, there was an expectation that it would take at least six months to actually close. At about the same time Visa made an offer for Tink, an open banking company based in Stockholm which has taken much longer.
If you're a regulated company being acquired by a large firm with competition issues, the mere fact that you signed the deal doesn't mean that you will actually close the deal - that itself engenders a whole lot of negotiation:
What if it takes an extra year? What if we run out of money while it's going on? What should you do? Should you break it? Should you not break it? How interested is everybody? Is the price going up while you're negotiating?
The issue is that this kind of regulatory approval negotiation gets stretched out over time. It has nothing to do with the goodwill or the good intentions of either party, but that means that the negotiation itself can be quite complex.
There was a mountain of work to be done
This was not easy and we owe a huge debt to our CFO, Fiona Tee. Fiona managed all the due diligence that occurred prior to, and after, the offer. It was a massive amount of work. Again, because we're a regulated FinTech company and because we have multiple subsidiaries, there was a huge amount to do.
Fiona Tee, CFO, Currencycloud: "No deal is done until the cash hits. Right to the last minute the unexpected can happen, so continuing to execute on BAU and your growth plan is critical and make sure you've got enough cash runway.”
The regulators have interest in what happens in each of those subs, how funds are held and segregated, how they show up, how that relates to antitrust authorities and regulatory authorities and all of that engenders a lot of legal, accounting and financial work in the background. This is needed to ensure that the asset (Currencycloud) is cleanly defined.
There was also a tremendous amount of work on the HR side, to make sure that everything is in place for our people and in good shape. Fiona had to manage the bankers and our lawyers - regulatory lawyers, deal lawyers, antitrust lawyers, personnel lawyers. You name them, she managed them.
Barbera De Jong Elder, Chief People Officer, Currencycloud: We wanted a good home for our people and from the very first conversation we had with Visa, they showed a genuine interest and respect for our People, our Culture, and Our Values. A cliche but ever so true "It is all about the people!”
Much of that work was done in the middle of the night!
The other big challenge, which is very common for a UK acquisition, is that Visa is a San Francisco company, so you don't start talking till about eight o'clock at night.
At two o'clock in the morning, on the day we wanted to close, a problem arose and people got together for a big meeting and we needed a signature from our Japanese investor. But Japan, and Tokyo in particular, had closed down for the Olympics, so there was nobody there. Our lawyer kept saying, “Mike, just trust them. They're honest people and they're good people. They'll come in.” And at 05.20 in the morning we got the Japanese signature and we closed at 0525. All the deals that I've ever been involved with seem to close at five o'clock in the morning. As this deal involved both Asia and California there were lots of negotiations from 2am to 4am.
We worked with the most incredible lawyer
We had our legal team and we’d worked with our lawyer, Ylan Steiner, for years. I have worked with him at three different firms and he’s now a Partner at Orrick. I met Ylan 20 years ago and he has been our corporate lawyer from the beginning, when we were working on closing our Series C round the law firm he was working for went out of business. What happened next was really quite remarkable: he took his whole team, moved them to another firm and completed our deal – and it was all seamless! He's that good and his deal team is good too.
Back to the Visa acquisition, we were working with Ylan and his team and facing off against mountains of people and lawyers on the other side, and there’s only a few of us. So, again, a lot of pressure on Fiona, but also on our Chief Compliance Officer, Tanya Ziv, and our Chief People Officer, Barbera De Jong. All of them did an incredible job.
Ylan Steiner, Partner, Orrick : “It was a pleasure to support Mike, Fiona and team on legal aspects of Currencycloud’s journey from early start-up in 2011 through to the exit to Visa. Here’s to their next endeavour!”
Keep the deal team small
I kept the team that worked on the deal incredibly small and it didn't leak inside the company at all, which I was very proud of. There was Barbara, Tanya, Fiona and myself, as well as a handful of people in cybersecurity, technology, finance, sales and HR. That’s it, that's all the people that worked on the deal. Deals can suck up a lot of time and may not actually happen, so the company must keep motoring on. Even though both parties may have the best intentions, there are so many roadblocks along the way and you don't want to get everybody involved, as it will leave everyone disappointed if it doesn’t come off and can be a massive distraction from running the company But in this case we managed to see it through and get an incredible result for all of our stakeholders.
Jos White, Partner, Notion Capital: "Notion was an investor in Currencycloud since 2011 and it was a long and rewarding journey. We always felt the vision was compelling - to build a digital platform to enable cross border payments in a fast, transparent and cost-effective way. The company had the opportunity to be part of the new, on-line payments infrastructure and they really delivered on this promise. Mike has been a fantastic leader for the business, always focused on the long term opportunity and developing a strong culture. The Visa acquisition is the culmination of many years of hard work and the start of an exciting new phase for the company. We are proud to have played a part in the Currencycloud journey."