Nasdaq-listed SoFi Technologies (SOFI) announced on Tuesday it is buying the Latin America-founded company Technisys for nearly $1.1 billion, valuing it as a unicorn. Under the all-stock deal, Technisys’ shareholders will receive aggregate consideration of roughly 84 million shares of SoFi common stock, less than 10% of SoFi’s fully diluted share.
The transaction is expected to close by the second quarter of 2022, pending closing conditions. SoFi’s stock was trading early Tuesday at $10.73, a drop of -5.79% from the previous day.
Founded by Argentine entrepreneurs Adrián Iglesias, German Pugliese Bassi, and Miguel Santos, Technisys is a provider of a digital banking software platform.
Its latest venture capital round was in 2019, a Series C led by Riverwood Capital when it has undergone an expansion from Latin America to US and Canada. The banking solution was also backed by Alta Ventures, Kaszek Ventures, Oria Capital, and Endeavor Catalyst.
It’s not the first Argentine tech company acquired over a billionaire valuation. Last year, the US company Okta acquired Auth0 for $6.5 billion.
For SoFi, the acquisition of the banking infrastructure software adds a strategic technology to provide products as a one-stop-shop financial services platform, in SoFi’s overall pursuit to build the “AWS of fintech”.
The company also said the acquisition will also add to the high revenue growth rate of SoFi and speed up its three-year revenue CAGR.
Together, Technisys and SoFi will serve 89 million enabled customer accounts across the U.S., Mexico, and Colombia, and Technisys’ more than 60 established bank, fintech, and non-financial brands in Latin America and the U.S. while expanding both companies’ partner bases in the U.S. and an addressable market across 16 countries.
They said the estimated incremental revenue from the acquisition, including base revenue of Technisys and revenue synergies of the vertically integrated capabilities, is expected to add a cumulative $500 to $800 million through year-end 2025, at high incremental margins.
SoFi, which went public in 2021 through a SPAC deal, also expects to leverage the technology stack to capture savings in third-party costs by integrating Technisys.
Once SoFi has migrated off its current multiple third-party cores to a single owned and operated Technisys core, it expects to be able to perform more real-time decisions, and offer greater personalization for its more than three million members.
SoFi estimates this shift and the vertical integration with Galileo will create approximately $75 to $85 million in cumulative cost savings from 2023 to 2025 and approximately $60 to $70 million annually thereafter.
The companies also said Technisys is on track to deliver approximately $70 million in revenue for calendar-year 2021 on an unaudited IFRS basis. With that, SoFi expects mid-teens internal rate of return (IRR) on a standalone basis through 2025, with significant upside in the IRR when accounting for anticipated revenue and cost synergies.
Following the closing of the acquisition, Technisys is expected to operate as an independent subsidiary of SoFi Technologies, and be part of its technology platform offering, with Miguel Santos continuing as CEO.
(This text has been changed to remove Kevin Ball from the list of founders; Ball is Chief Officer Operation, but did not found the company in 1995.)