In their joint acquisition of Currencies Direct, US private equity firm Corsair Capital and the UK's Palamon Capital Partners are investing an equal amount of capital and will hold equal shares, Corsair chairman Mervyn Davies told Private Equity International.
The partnership will hold a substantial majority stake in the UK foreign exchange company and two board seats following the completion of the transaction, valued at more than £200 million ($311 million; €279 million), Davies said. He declined to comment on the amount of equity invested.
The company's existing management will also increase its stake, and its founder Mayank Patel will remain a shareholder and become honorary president, according to a statement. A new chairman will be appointed when the transaction is completed by the end of the year.
Corsair's preference is to do co-investments, and the firm and Palamon, which sourced the transaction, had both been looking for investments in this space, Davies said.
“We bring different things. We have deep financial service expertise and Palamon brings European experience,” he said.
Corsair's portion of the investment will come from its Corsair IV Financial Services Capital Partners Fund, a 2010-vintage, $863 million vehicle.
Palamon will invest through its Palamon Auxiliary Partnership 2013 fund, a two-year, €210 million co-investment vehicle. The firm invests growth capital of between €15 million to €80 million in European lower mid-market companies, according to its website.
Currencies Direct services both retail and corporate clients and the private equity partnership plans to grow the business by expanding it internationally, focusing on payment processing and building its customer base.
The company currently operates in the UK, Europe, Australia, South Africa and the US and has more than 150,000 retail clients, the statement said.
“What attracted us to the business is that it is a specialist company and both firms see it as a growth sector,” Davies said. “It's a big business in a big market.”
The market for retail and small and medium foreign exchange in the UK is worth more than £3 billion, the statement said.
“Yet again you see a very interesting business that is disintermediating the banks. Firms are able to disrupt a sector with strong customer service and strong IT,” said Davies, who was chairman of Standard Chartered Bank from 2006 to 2009, having served as CEO from 2001 to 2006, and UK Minister for Trade, Investment and Small Business and Infrastructure from 2009 to 2010.
In July, Corsair partnered with Blackstone to acquire the US's First Eagle Investment Management in a transaction that valued the company at $4 billion, PEI reported previously.
In June, Palamon began marketing its Palamon Auxiliary fund to purchase stakes made by its previous funds, according to PEI's Research and Analytics division.