Playtech has resumed efforts to develop its Financials division with the acquisition of London-based Consolidated Financial Holdings (CFH), a trading solutions provider offering brokers an automated capital market and payments processing product.
The acquisition is designed to bolster Playtech's B2B capabilities within Financials by giving the supplier access to CFH's Straight Through Processing (STP) solution. This provides brokers with a range of financial trading tools such as multi-asset execution, prime brokerage services and liquidity and complementary risk management tools.
CFH currently has more than 400 customers in around 80 countries, which Playtech said makes it "one of the largest and most reputable B2B providers for technology and clearing in the industry".
As a leading STP provider it holds $1.5bn in direct interbank credit lines with top-tier banks such as Barclays, Goldman Sachs, UBS and BNP Paribas.
The company generated revenue of $19.2m and adjusted EBITDA of $5.7m in 2015, with 2016 revenue this year expected to rise to $29.0m.
"The acquisition of CFH will strengthen Playtech's offering in the B2B market of financial trading and provide the foundation for future acquisitions as well as to become one of the only businesses to offer proprietary, dedicated B2C and B2B platforms to clients,” Playtech Financials CEO and group finance chief Ron Hoffman said.
"CFH has proven technological capabilities and has developed not only a leading platform in the STP Brokerage industry, but also relationships with an impressive range of retail brokers operating in a variety of jurisdictions worldwide, alongside long term relationships with a suite of tier 1 banks, prime brokers and liquidity providers.
"We are delighted to welcome CFH and its management team into Playtech's Financials division and believe that the CFH brand will continue to flourish within the Playtech family," he added.
Playtech said the acquisition enables CFH to offer its customers improved trading terms and more attractive margins thanks to its scale and financial clout, as well as pooling liquidity with the supplier's existing financial assets. CFH will also gain access to the Financials division’s existing range of Contract For Difference instruments, which will be offered on its clearing system in future.
Playtech will also look to use its CRM technology to strengthen the CFH product, similar to its use of marketing solutions to enhance acquired assets in its gaming division.
"CFH's vision was always to empower local brokerage businesses around the world, allowing them to successfully compete in their markets by providing end customers the best access to pricing, technology and tools," CFH founder and chief executive Christian Frahm said.
"Being part of Playtech gives us access to best of breed technology, significant resources and expertise to become the number one B2B provider in the industry."
Playtech is acquiring CFH for an initial consideration of US$43.4m for a 70 per cent stake in the business, representing a multiple of 7X the supplier's current EBITDA run rate. The remaining 30 per cent is subject to a call option exercisable in 2019.
The acquisition has already received approval from the UK Financial Conduct Authority, which regulates CFH’s wholly-owned subsidiary CFH Clearing Limited.