UBS exits Wealthfront after agreeing to $1.4 billion acquisition

• UBS and Wealthfront mutually terminated the $1.4 billion acquisition announced earlier this year.
• Despite the withdrawal, UBS provided Wealthfront with $69.7 million in funding at a $1.4 billion valuation.
• The termination of the deal comes after a significant decline in the fintech’s valuations.

Regardless of the circumstances, a breakup is always difficult. Just ask a financial services firm UBS and robocounselor Wealthfront.

After agreeing to acquire Wealthfront in a deal valued at $1.4 billion in January, the two announced last week that the deal was off. Before last week, the acquisition was expected to close in the second half of this year. However, both sides cited “unspecified regulatory concerns” as the reason for the deal’s collapse.

Buying Wealthfront, the California-based roboadvisor, would help Switzerland-based UBS grow in the U.S. market and also offer access to Wealthfront’s digital wealth management tools and user-friendly technologies.

In January, Wealthfront had 470,000 clients and $27 billion in total assets under management. The company was founded in 2008 by Andy Rahleff and Dan Carroll as KaChing and rebranded as Wealthfront in 2010. The company is known for its easy-to-use, automated investing tools. Last year, Wealthfront added to its reputation by creating a Socially Responsible Investing Portfolio which is designed around sustainability, diversity and equity.

“We continue to explore ways to work together in partnership, and UBS has provided us with $70 million in funding at a $1.4 billion valuation,” said Wealthfront CEO David Fortunato. “With this new round of funding under our belt, along with the ability to start self-funding the business, we are committed to building a long-lasting company that positively impacts the lives of our customers for decades to come.”

UBS offered the new investment, which totaled $69.7 million, through bonds convertible into Wealthfront shares. “This protects other Wealthfront investors from potentially having to dilute their stakes in the companies,” explain Wall Street Journal

It’s worth noting that the cancellation of the acquisition comes after a significant decline in the fintech’s valuations. If the deal went through, UBS would likely have overpaid for Wealthfront. It will be interesting to see if the Swiss bank acquires a cheaper US-based roboadvisor as a replacement now that valuations have declined.

Picture from Kelly Sikema On Unplash