Frankfurt It would have been the biggest deal in the history of N26: According to Handelsblatt information, the financial start-up wanted to buy the Dutch securities dealer Bux, but then backed down at the last minute.
By acquiring Bux, N26 would also have been able to offer its customers the buying and selling of stocks and ETFs. However, the deal collapsed shortly before completion because N26’s complexity was too high, several people familiar with the topic told the Handelsblatt. In addition, the companies could not have agreed on a new management structure and valuation.
In the room there was a valuation of more than 100 million euros for Bux, said one of the insiders. N26 was valued at 7.7 billion euros in the last financing round in 2021, making it one of the most valuable fintechs in Germany.
Bux declined to comment on the subject. An N26 spokeswoman said: “We always look at interesting companies that fit our strategic goals, but we generally do not comment on rumors or speculation.”
For a long time, the smartphone bank had focused on the classic banking business – and dispensed with other offers such as stock or crypto trading. In November 2022, the company then started a cooperation with the Viennese crypto start-up Bitpanda in order to at least be able to offer crypto currencies.
Among other things, Bitpanda offers its technical infrastructure to other companies as a so-called white-label solution: N26 customers can buy and sell cryptocurrencies in the smartphone bank’s app. Bitpanda carries out the trading and stores the coins.
N26 wants to offer trading in shares and ETFs
In addition to crypto trading, the N26 management is also looking for ways to cover the classic stock and ETF business. “Our goal is to build up a strong foothold there over the next two years,” said co-founder and co-boss Valentin Stalf in October 2022.
The so-called brokerage business is important for banks in order to generate commission income in addition to interest income. In addition, many customers appreciate being able to handle all of their finances via one app and not needing several for bank transfers and investments. N26 is therefore aiming to either buy a broker or set up a corresponding offer itself, said a person familiar with the matter.
Bux, a neo-broker founded in 2014 and based in Amsterdam, initially focused on trading in contracts for difference (CFD), but now also enables trading in shares and ETFs. By its own account, Bux has more than a million customers and is active in a total of eight markets, including the Netherlands, France and Germany.
The last round of financing took place in April 2021. At this point, the neobroker raised about $80 million. Investors include Tencent, HV Capital and ABN Amro Ventures.
Bux uses systems from ABN Amro. The possible dependency on this technology was an issue that was viewed critically at N26, said a person familiar with the talks. The current market environment and the assessment of business prospects also played an important role in the negotiations.
Declining trading activity is hitting brokers
At the beginning of the corona crisis, brokers were still among the big winners. Investors were more concerned than ever with how to invest their money and acted eagerly. Trading activity then dropped significantly last year as a result of the stock market slump.
Neobrokers like Bux and Trade Republic felt the effects. “Our savings plan business continues to grow, but trading volumes in shares have declined,” said Trade Republic co-founder Christian Hecker recently.
During the negotiations, N26 may have wanted to take the opportunity to acquire Bux at a relatively low price. In addition, investors have become fundamentally more reluctant to finance start-ups because of the turnaround in interest rates and the crash in technology stocks.
At the end of 2022, N26 made it clear that an IPO of its own is currently not an issue given the difficult market environment. The priority is to remedy the deficiencies identified by the financial regulator Bafin.
The Financial Regulator believes that for many years N26 has grown too rapidly and has not evolved its processes and controls accordingly. In November 2021, the Bafin therefore sent a special representative to the bank and ordered that N26 be allowed to accept a maximum of 50,000 new customers per month.
The fact that N26 has now canceled the takeover of Bux because the institute wants to avoid additional complexity and governance problems should be well received by the financial regulator.
More on the subject: Neobank N26 launches crypto trading in Germany – Bitpanda as partner