Brazilian Brokerage XP to Acquire Específico Investment Bank Parcialidad Modal

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On Friday January 7, XP Inc. a Brazilian investment management company, announced an agreement reached that would make it acquire Banco Modal, a Brazilian investment banking firm. XP stated that it is purchasing a stake of up to 100% of Modal in a deal that will see Modal’s shareholders receive up to 19.5 million in XP shares. The transaction is set to make Modal’s valuation stand at $528.5 million.

XP expects that the deal would enable it to improve its banking credential through Modal, which operates as an investment banking firm, including its investment platform combined with banking and digital services. Modal also has more than 500,000 brokerage clients.

Together, XP and Modal have more 3.8 million clients and a 12-month net revenue of more than $2.08 billion as of September 2021, XP mentioned in a statement.

As part of the deal, Modal will remain independent and keep its branding and will be able to access XP’s technology and infrastructure services.

However, the deal is still awaiting regulatory approval. The firms hope to complete the
 
 merger 
, which also needs to go through regulators within the next 15 months.

XP Chief Financial Officer Bruno Constantino, talked about the development and said: «Given the immaterial overlap between XP and Modal’s clients, we expect that interesting revenue synergies and client experience enhancements will be captured.”

Meanwhile, XP CEO Thiago Maffra, also commented about development and stated: “Brazil has one of the most concentrated financial sectors globally and together we’ll be able to be even more competitive against the traditional banks. Our priority is to constantly improve the value proposition for Brazilian consumers.”

How Firms Are Adapting during Difficult Economic Conditions

The development by XP to buy Modal comes at a time when competition for strategic market advantage continues influencing merger and
 
 acquisition 
activities across the financial services industry. In the first half of 2021, deals for technology and innovation continued to trigger such activities. Acquisition and divestitures are expected to continue in the upcoming months, as asset managers, insurance companies, banks, and brokerage firms seek to increase margins and efficiency, optimize cost structures, and grow top-line growth. As such, transformation is in the mind of dealmakers’ overall strategic goals. Troubled by pressure from regulators and persistent low interest rates on one hand, and by disruption from fintechs, platforms, and continued digitalization on the other hand, financial companies need to evolve to meet such challenges. A key aspect of M&A activity is likely to be the continued formation of strategic partnerships and ongoing consolidations.

On Friday January 7, XP Inc. a Brazilian investment management company, announced an agreement reached that would make it acquire Banco Modal, a Brazilian investment banking firm. XP stated that it is purchasing a stake of up to 100% of Modal in a deal that will see Modal’s shareholders receive up to 19.5 million in XP shares. The transaction is set to make Modal’s valuation stand at $528.5 million.

XP expects that the deal would enable it to improve its banking credential through Modal, which operates as an investment banking firm, including its investment platform combined with banking and digital services. Modal also has more than 500,000 brokerage clients.

Together, XP and Modal have more 3.8 million clients and a 12-month net revenue of more than $2.08 billion as of September 2021, XP mentioned in a statement.

As part of the deal, Modal will remain independent and keep its branding and will be able to access XP’s technology and infrastructure services.

However, the deal is still awaiting regulatory approval. The firms hope to complete the
 
 merger 
, which also needs to go through regulators within the next 15 months.

XP Chief Financial Officer Bruno Constantino, talked about the development and said: «Given the immaterial overlap between XP and Modal’s clients, we expect that interesting revenue synergies and client experience enhancements will be captured.”

Meanwhile, XP CEO Thiago Maffra, also commented about development and stated: “Brazil has one of the most concentrated financial sectors globally and together we’ll be able to be even more competitive against the traditional banks. Our priority is to constantly improve the value proposition for Brazilian consumers.”

How Firms Are Adapting during Difficult Economic Conditions

The development by XP to buy Modal comes at a time when competition for strategic market advantage continues influencing merger and
 
 acquisition 
activities across the financial services industry. In the first half of 2021, deals for technology and innovation continued to trigger such activities. Acquisition and divestitures are expected to continue in the upcoming months, as asset managers, insurance companies, banks, and brokerage firms seek to increase margins and efficiency, optimize cost structures, and grow top-line growth. As such, transformation is in the mind of dealmakers’ overall strategic goals. Troubled by pressure from regulators and persistent low interest rates on one hand, and by disruption from fintechs, platforms, and continued digitalization on the other hand, financial companies need to evolve to meet such challenges. A key aspect of M&A activity is likely to be the continued formation of strategic partnerships and ongoing consolidations.

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