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Vista Equity Partners Considers Sale of Finastra’s TCM Business Amid Mixed Results and Complex Refinancing

Vista Equity Partners is again considering potential options for Finastra, a fintech investment that is now well into its second decade as part of the firm’s portfolio. This time, Vista is preparing to sell Finastra's treasury and capital markets (TCM) business, picking back up similar plans that had been shelved in 2021.

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Bloomberg reports that Vista has held preliminary discussions with advisers about a sale process that could launch later this year. Valuation expectations are said to be at least $2 billion, or around 5.0x on the roughly $400 million of 2023 revenue generated by the TCM business. For context, Finastra posted total 2023 revenue of around $1.85 billion.

The TCM unit, which provides software for financial institutions to manage treasury operations, trading, and risk, could attract interest from a range of potential buyers, including other financial software providers, stock exchanges, and financial institutions looking to bolster internal tech capabilities.

As a whole, Finastra has seen mixed results in recent years, hit by both increased market competition and a complex transition from its legacy product offerings to new cloud-based implementations. Within TCM specifically, Finastra now faces off against a host of established rivals, including ION Group, Murex, and FIS. The combined business' revenue has been flat-to-down since 2019, when Vista hired Goldman Sachs to gauge market interest for a 50 percent stake sale, though the process was halted at the start of the pandemic.

Vista formed Finastra in 2017 through the merger of D+H Corp., a Canadian payments processor it purchased for $3.6 billion, and Misys, a capital markets business which Vista had acquired in 2012, tried to IPO in 2016, and then decided to hold after running up against public markets volatility.

Following the abandoned Goldman-led stake sale, Vista next tried in 2021 to sell off both the TCM business and the company's banking software division. That process stalled as well, which pushed the firm into a 2023 refinancing effort ahead of an upcoming debt maturity.

Last summer's attempt at a $6 billion private credit refinancing—which would've been the largest ever—faced pushback from lenders, who had particular trouble getting comfortable with the $1.5 - $2 billion second-lien portion of the proposal. According to filings, Finastra's net leverage as of May 2023 was 9.97x, excluding any additional credit agreement addbacks.

With middling performance, hesitant lenders, and a compressed timeline before the 2024 maturity, Vista agreed to a concession in which the firm contributed $1 billion in new money through a preferred equity investment (with liquidity provided by a Goldman Sachs-led NAV loan), which was enough to secure a $4.8 billion package from a group of lenders including Blue Owl, Ares, Oak Hill, HPS, Oaktree, and Elliott.

Vista will be hoping that the current attempt at Finastra-related dealmaking comes with fewer headaches than its prior efforts.

Sam Hillier

Sam Hillier is a reporter at Transacted covering private equity and investment banking. He previously spent time as an investment professional focused on middle market buyouts.