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.

2. Advantages and disadvantages of acquiring a ready-made licensed entity

Acquiring a ready-made entity can be advantageous for an investor due to the time factor. Usually, the change of ownership of a ready-made licensed entity allows for the faster commencement of operations as the entity is already active under the supervision of the regulator in the jurisdiction. The organisational structure is in place with key positions such as directors and Anti-Money Laundering Compliance Officers (AMLCO) already approved.

Another advantage of acquiring a licensed entity is the confidence it gives to banks, business partners, foreign investors, and clients. They are more likely to be enticed in continuing to do business with an already established and licensed company. Hence, there is value in the perception of reduced risk when undertaking business with a company that has been around for some time.

On the other hand, acquiring a licensed entity can be more costly than forming a new company and then applying for a license. The cost of the acquisition is due to several factors such as supply and demand, clientele, IT set up, clients’ funds, talent employed and so on. Furthermore, the jurisdictions’ popularity plays a significant role. Popular jurisdictions are more likely to attract a larger pool of investors and this can result in a bidding war; whereby multiple investors engage with bids in hope of acquiring the entity for sale.

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 info@salvusfunds.com 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.