UBS Ditches Wealthfront After Agreeing to a $1.4 Billion Acquisition – Finovate

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  • UBS and Wealthfront have mutually terminated a $1.4 billion acquisition announced earlier this year.
  • Despite the call-off, UBS has given Wealthfront $69.7 million in financing at a $1.4 billion valuation.
  • The termination of the deal comes after a significant decline in fintech valuations.

No matter the circumstances, breakups are always hard. Just ask financial services firm UBS and roboadvisor Wealthfront.

After agreeing to acquire Wealthfront in a deal valued at $1.4 billion in January, the two announced last week that the deal was off. Prior to last week, the acquisition was expected to close in the second half of this year. However, the two parties cited “unspecified regulatory concerns” as a reason for the deal collapse.

Purchasing Wealthfront, a roboadvisor headquartered in California, would have helped Switzerland-based UBS grow in the U.S. market and also would have offered access to Wealthfront’s digital wealth management tools and user-friendly technologies.

In January, Wealthfront had 470,000 clients and a total of $27 billion in assets under management. The company was founded in 2008 by Andy Rachleff and Dan Carroll as KaChing, and rebranded under the Wealthfront name in 2010. The company is known for it user-friendly, automated investing tools. Last year, Wealthfront added to its reputation by creating a Socially Responsible Investing Portfolio that is designed around sustainability, diversity, and equity.

“We are continuing to explore ways to work together in a partnership and UBS has given us $70 million in financing at a $1.4 billion valuation,” said Wealthfront Chief Executive Officer David Fortunato. “With this fresh round of funding under our belt along with the ability to begin self-funding the business, we are committed to building a lasting company that positively impacts the lives of our clients for decades to come.”

UBS has offered the new investment, which totals $69.7 million, via notes that can be converted into Wealthfront shares. “That protects other investors in Wealthfront from potentially having to mark down their stakes in the companies,” explained the Wall Street Journal

It is worth noting that the call-off of the acquisition comes after a significant decline in fintech valuations. If the deal was to have gone through, UBS would have likely overpaid for Wealthfront. It will be interesting to see if the Swiss bank will acquire a cheaper U.S.-based roboadvisor as a replacement now that valuations have decreased.


Photo by Kelly Sikkema on Unsplash

Go to Publisher: Finovate
Author: Julie Muhn (@julieschicktanz)