JC Flowers Buys 30% Stake in LMAX Group

Private investment firm JC Flowers has agreed to buy a 30% stake in LMAX Group for $300 million in cash, a deal that values LMAX Group at $1 billion. The transaction is subject to regulatory approval and is a secondary share sale by LMAX Group employees.

The firms say they will partner to accelerate LMAX Group’s next phase of growth and innovation, and together see potential for greater penetration in the FX and crypto currency markets globally, particularly in the US and Asia.

Following the transaction, David Mercer, CEO, will continue to lead the company having retained a substantial stake alongside his management team and JC Flowers. “This is a significant milestone in the evolution of LMAX Group that vindicates our industry-leading business model and the role we have to play in the foreign exchange and crypto currency markets of the future,” says Mercer. “Not only have we identified a like-minded partner in JC Flowers who understands global capital markets and brings valuable connectivity to strengthen LMAX Group’s presence in North America and Asia, but one that shares our vision of building the company into the pre-eminent global FX and crypto currency exchange. I’m excited about the many opportunities that lie ahead for LMAX Group and my fantastic group of colleagues.”

Headquartered in London, LMAX Group operates five exchanges globally, matching engine infrastructure in London, New York and Tokyo with clients in over 100 countries. It has revealed plans to open a sixth exchange in Asia-Pacific in the near future – given the wider trend in FX markets, this is likely to be in Singapore.

The deal with JC Flowers, which has invested over $16 billion in 58 financial services companies since it was founded in 1998, will provide LMAX Group with connectivity and a network in the US and Asia – two regions targeted by LMAX for expansion. “JC Flower understand markets and they believe in our vision to become the preeminent provider in the FX space,” says Mercer, who also reveals that he, and the management team at LMAX Group, have rolled their stake. “We believe in our strategy and want to bring it to fruition,” he explains.

Although there will be no cash injection as part of the deal, having JC Flower as a major shareholder will probably give LMAX Group more firepower going forward. “We can fund our projects organically, but if the right opportunity emerges we can tap into JC Flower’s strategic know-how, international connectivity and network to leverage it”, acknowledges Mercer.

Perhaps the key to the deal is LMAX maintaining its independence. “Our independence has proven itself in how quickly we can respond to client demands or new trends in the industry, and we prize it greatly,” says Mercer. “It has enabled us to respond quickly and effectively to client demands and technological trends, and will continue to do so.”

Chris Flowers, managing director and CEO, JC Flowers & Co, adds, “LMAX Group is an exciting and well-respected company with a leading position in a market with great potential, making it a highly compelling opportunity for our firm. The LMAX Group exchange infrastructure offers efficiency and transparency, both of which are in high demand by the growing numbers of institutional participants in foreign exchange and cryptocurrency trading. David and his management team have driven considerable international growth in recent years, and we look forward to supporting them as they continue to expand their support of the world’s top institutional market actors.”

Ultimately, this is a deal that is likely to make the FX industry sit up and pay attention, because if nothing else it should transition LMAX Group in the minds of those who still see it as a start-up, to a serious player. Although crypto volumes continue to grow on LMAX Digital (currently around $2 billion per day, and FX volumes on the no last look venue are north of $20 billion per day, this transaction is more about the business model than it is a volume play. “Our technology and our business model have been vindicated countless times by banks, asset managers, brokers and hedge funds who trade with us every day,” says Mercer. “This deal is further endorsement of our approach. We want to build a fair and equitable FX ecosystem and lead the industry. We’re not there yet, but this deal will help us to get there.”