Why consider a licensed entity acquisition?

Acquiring a licensed entity is a strategic move and can be a challenging procedure. Many variables need to be examined before engaging in a shares purchase agreement (SPA) of a licensed entity. Variables can range from previous or current regulatory issues to more straightforward aspects such as the composition of the Board of Directors (BoD) or the specific regulator’s stance on changes of ownership.

Licensed entities for acquisition can be investment firms, investment funds, payment and electronic money institutions (EMI), crypto-exchanges, and other regulated entities.

Throughout this article, our Acquisitions team at SALVUS aims to shed some light on:

1. The different types of entities for sale and their jurisdictions
2. Advantages and disadvantages of acquiring a ready-made licensed entity
3. How long is the procedure to acquire a ready-made licensed entity?
4. How does SALVUS approach the acquisition of licensed entities?

1. The different types of entities for sale and their jurisdictions

There are a plethora of licensed entities in numerous jurisdictions across the globe. Licensed entities can operate as CFD brokerages that are straight-through processing (STP) or market makers, as payment institutions offering merchant accounts or as crypto-asset services providers – the business models list is endless. These businesses are regulated under different jurisdictions, operating with different commercial models and are suitable for different purposes. In our experience, penetrating a new market is a common reason and improving banking relationships is a close second, when it comes to the motivation of potential buyers.

Depending on the regulatory framework instilled by the relevant national competent authority (NCA), a jurisdiction can be a better host to accommodate a specific business model. In the case of the European Union, Lithuania quickly became the jurisdiction of choice for Electronic Money Institution (EMI) and Cyprus the go-to destination for online trading investment firms. The Cyprus Securities and Exchange Commission (CySEC) has been looking to replicate this in the crypto-space and, as an emerging fintech and investment funds hub for the past decade, introduced the Crypto-Asset Services Providers (CASP) registration regime.

Apart from the EU, there are other prominent jurisdictions globally that investors may select to set up or acquire an entity licensed in investment or payment services. Singapore, Mauritius, Seychelles, the Bahamas, and Belize are some noteworthy jurisdictions for crypto-exchanges, investment firms, investment funds, payment and electronic money institutions (EMI).

Additionally, modern, and investment-friendly regulatory frameworks are a crucial part of attracting different types of entities. The Dubai International Financial Centre (DIFC) with the Dubai Financial Services Authority (DFSA),  are a prime example of a jurisdiction that for the past two decades has incentivised some of the world’s leading fintechs and venture capital investment funds to establish themselves and offer their services out of and within the region.

3. How long is the procedure to acquire a ready-made entity?

The timeframe often comes down to

  • how agreeable are the key stakeholders during the negotiation process and how prepared they are to provide what each side will require for the due diligence,
  • how quickly the regulator can review the application for change of ownership,
  • how complete the profiles of the UBOs, the acquiring entity, the intentions, the proof and source of funds and other important factors have been presented.

From our experience dealing with various transactions, the procedure can vary from 6 months to one year. However, each project can be susceptible to unique characteristics which influence the timeframe.

4. How does SALVUS approach the acquisition or sale of an entity?

Our team at SALVUS has extensive experience in matters relating to the acquisition or sale of licensed entities as well as within the financial and investment services industry as a whole.

We have experience connecting sellers with qualified buyers from a range of different jurisdictions globally. Some of these include South Africa, Mauritius, BVI, Malta, Ireland, Luxemburg, Lithuania, Dubai and other prominent destinations.

Further, we facilitate the acquisition or sale of investment firms, investment funds, Payment Institutions (including EMI), crypto-exchanges, via our Entities for Sale service. We implement a project management approach and using our vast network of trusted associates and partners worldwide, we work together in identifying your target entity or suited buyer. Once engaged, the Acquisitions team at SALVUS, will be focused on the

  • identification of the target entity or suited buyer,
  • support in negotiations to avoid delays or setbacks,
  • compliance, legal and financial due diligence,
  • provision of all transaction agreements,
  • provision of escrow accounts, and
  • liaising for changes of shareholding with competent authorities, and Company’s registrar.

Please contact us via email at [email protected] or call us at +357 7000 7898 if you would like additional information about how we can help you acquire or sell a licensed entity; we remain at your disposal.

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The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.

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