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F T. C O M

JC Flowers stake in LMAX values
currency platform at $1bn
Transaction reflects hefty price tags in the booming cryptocurrency space
E VA S Z A L AY – LO N D O N

Private equity investor JC Flowers has agreed to pay $300m for a 30 per cent stake in LMAXGroup © FT montage/Bloomberg

The eye-popping valuations attracted
by cryptocurrency companies areseeping into traditional foreignexchange markets, after a minority
investment in currency trading
platform LMAX Group has valued thecompany at $1bn.
New York-based private equity investor
JC Flowers agreed on Thursday to pay$300m for a 30 per cent stake in LMAX
Group, acquiring a minority stake fromthe firm’s management who remain
majority owners.
The $1bn price tag is 20 times the company’s earnings before interest, taxes,
depreciation and amortisation in thepast 12 months. In 2018, the company
was valued at £100m.
The deal resembles valuations seenin the booming cryptocurrency space,
where a raft of recent transactions haveattracted billions of dollars in investment.
© THE FINANCIAL TIMES LIMITED 2021

LMAX has expanded its crypto services inrecent years and the investment will aim
to boost the company’s growth in bothforeign exchange and cryptocurrency
markets, with a special focus on the USand Asia.
By contrast, foreign exchange platforms have struggled to attract such
hefty sums FastMatch, a one-time rivalof LMAX Exchange, was sold to Euronext
for $153m in 2017.
“The valuation is not about theproduct, whether it’s crypto or foreignexchange, it’s an endorsement of ourbusiness model,” said David Mercer,chief executive of LMAX.
Mercer said the company will belaunching a new currency trading venue
in Asia in the last quarter of the year.
Despite playing down the importanceof digital coins as a future revenue
source, the deal is likely to reflect a bet on
this fast growing space from investmentcompany JC Flowers. Mercer said that in
the first half of the year cryptocurrency
trading volumes accounted for 11 percent of the total, but as much as a thirdof revenues.
London-based LMAX was foundedin 2010 by betting company Betfair.
Mercer then led a management buyout
in 2012, acquiring a majority stake fromthe betting company, which fully exitedthe business in 2018. Mercer and his
team paid less than £22mn for Betfair’s
remaining 31.5 per cent share there years
ago.
The group operates currency trading
venues across the globe and in 2018 it
launched LMAX Digital, a cryptocurrency
marketplace for large institutional
traders. For the first six months of theyear, the company recorded a gross profitof $60.5m.
Mercer believes LMAX’s high valuationin the deal vindicates the company’s
strategy of choosing to operate as aregulated exchange in the $6.6tn daily
currencies market, where most deals are
privately negotiated.
“I was shouting into a vacuum 10years ago, but this validates our businessmodel,” Mercer said. “For 10 years, I’ve
been asked what the point of LMAX wasand why it was different — surely we’ve
differentiated ourselves now.”
Mercer said that he and the majorityof the senior management team havechosen to roll their equity holdings,
betting on a larger windfall in the future.
He described the move as a “steppingstone”, but declined to say if future plansinclude a potential stockmarket listing.
“It’s way too early to talk about exits,
this deal is just a stepping stone,” he said.