Zurich: UBS Group AG abandoned its $1.4 billion deal to acquire US robo-adviser Wealthfront, unwinding what would have been the first major acquisition under the leadership of the Swiss bank’s CEO, Ralph Hamers.
The companies together decided to terminate their January merger agreement, according to statements from both of them on Friday that didn’t specify a reason. UBS will purchase a $69.7 million note convertible into Wealthfront shares.
“I am incredibly excited about Wealthfront’s path forward as an independent company,” the venture’s CEO, David Fortunato, said in its statement. He predicted the firm will be cash-flow positive and profitable before interest, taxes, depreciation and amortization “in the next few months.”
UBS reached the deal when financial technology startups were commanding higher valuations. But in the months since, US markets, and tech stocks in particular, have tumbled and set off a wave of investor markdowns for privately held companies. That downturn could even erode Americans’ readiness to invest their savings in the months and years ahead.
Representatives for UBS and Wealthfront declined to comment further.
Founded in 2008, Wealthfront was an early robo-adviser, using algorithms to help users manage money. Zurich-based UBS was looking to add more than $27 billion in assets under management and over 470,000 clients in the US through the purchase.
Hamers had trumpeted the Wealthfront acquisition as a way to reach customers who prefer a cheaper app-based approach to managing their money, and who may have smaller amounts available to invest.
“In Wealthfront, we found a partner that shares our vision, our values, our culture,” Hamers said in a call with analysts earlier this year. He added that the focus on technology at Wealthfront would be a boon to UBS.