UBS cancels $1.4 billion acquisition of robo-advisor Wealthfront
Swiss bank UBS and US robo-advisor Wealthfront have terminated their $1.4 billion acquisition deal, just over eight months after announcing the partnership, the companies said Friday.
It scraps what would have been the largest acquisition by UBS since the 2008 financial crisis. The purchase was also seen as a statement of intent from CEO Ralph Hamers about his plans to increase the bank’s presence in the US asset management market.
“UBS remains committed to its growth plans in the US and will continue to build out its digital asset management offering,” UBS said in a statement.
The companies gave no reason for the termination, but the news comes after a sharp drop in valuations of financial technology companies since the all-cash transaction was announced in January.
Wealthfront chief executive David Fortunato said the two companies are still looking for ways to work together and that UBS has given his company $70 million in financing at a valuation of $1.4 billion.
“I am incredibly excited about Wealthfront’s path as an independent company and am proud to share that thanks to the hard work of our team and the trust you place in us, we will have positive cash flow” and be profitable on based on earnings before interest, taxes, depreciation and amortization “in the coming months,” Fortunato said.
The acquisition of Wealthfront, which uses automation to provide banking services and financial advice, is expected to close in the second half of this year.
Popular with millennials and Generation Z customers, Wealthfront was founded in 2008 under the name kaChing. It was launched by former Benchmark Capital partner Andy Rachleff, aimed at individual investors looking to track and replicate successful investment portfolios.
Since the acquisition of Wealthfront was agreed in January, UBS has appointed Iqbal Khan as the sole head of its flagship wealth management unit in a management reshuffle that saw division co-head Tom Naratil announcing his departure from the bank.
Additional reporting by Owen Walker in London