JP Morgan’s Acquisition of OpenInvest
Deal Overview
- Announcement date: 29th June 2021
• Industry: FinTech
• Deal Value: Not disclosed
• Deal consideration: Not disclosed
• Acquirer advisors: J.P. Morgan
• Target advisors: Moelis & Company LLC
Company Details: J.P. Morgan Chase & Co.
• Founded: 1st December 2000
• HQ: New York, USA
• Market Cap: 472.17B
• EV: 233.68B
• LTM EBITDA: N/A
• EV/LTM EBITDA: N/A
JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm and America’s largest bank founded on over 1,200 institutions (including J.P. Morgan and Chase Manhattan) reaching back to 1799.
JPMorgan’s Asset & Wealth Management segment provides services across all asset classes, and has $2.7 trillion of assets under management. The company provides a range of services worldwide including investment management and private banking for a clientele ranging from institutions and high-net-worth individuals to retail investors.
Company Details: OpenInvest
• Founded: 2015
• HQ: San Francisco, California, USA
• Market Cap: private
• EV: N/A
• LTM EBITDA: N/A
• EV/LTM EBITDA: N/A
Source: openinvest.com
OpenInvest is a leading fintech start-up aimed at helping financial advisors unlock the true impact of their clients’ investments. OpenInvest offers environmental, social and governance (ESG) investing solutions to build highly personalised, dynamic, values-based portfolios. Data from over 35 sources is used by the platform’s tools to provide insight and control how users’ core values are implemented; it considers metrics such as greenhouse gas emissions, use of natural resources, diversity in leadership, LGBTQIA+ rights, racial justice and disability inclusion to promote sustainable investing.
Backed by capital from Y Combinator, Andreessen Horowitz and QED, OpenInvest is one of the only VC-backed Public Benefit Corporations.
Strategic Rationale
Next level sustainable investing
Interest in environmental, social and governance (ESG) investing has been gaining momentum over the last couple of years, driven by the rise in public awareness of global warming and social issues. The acquisition of OpenInvest will help JPMorgan’s financial advisors better customise clients’ investments to meet the demand for sustainable investing. Mary Callahan Erdoes, CEO, J.P. Morgan Asset & Wealth Management said “Clients are increasingly focused on understanding the environmental, social, and governance impact of their portfolios and using that information to make investment decisions that better align with their goals”.
Under the agreement, OpenInvest will continue to retain its own brand and be integrated into J.P. Morgan’s Private Bank and Wealth Management client offerings. Pairing with America’s largest bank will enable OpenInvest to expand its customer base to almost a half of households across the U.S. and to further promote the ESG investing trend.
Customised investing solution
ESG funds are becoming increasingly popular, with global assets under management reaching nearly $2 trillion in 2021. U.S. sustainability-focused funds attracted a record $21.5 billion in net inflows. The figure has more than doubled since the beginning of 2020, up from $10.4 billion. OpenInvest’s management solutions use pioneering technology to create low-cost investment portfolios tailored to each client; investors can choose the specific values most important to them and can see the tangible impact their portfolios have on the world, as demonstrated by impact reports generated by OpenInvest.
Worldwide positive impact
Open endorsement of sustainable investing by a major financial institution will encourage this trend. With an increasing number of investors focusing on ESG factors, companies will have an added incentive to concentrate their efforts on reducing their environmental impact and demonstrating ethical running of their business. This should result in improvement of many aspects such as lower carbon emissions and greener waste management, and encourage unbiased hiring and fair wages.
Complementing services
JPMorgan Asset Management recently acquired another Fintech company, 55ip, which is primarily focused on automating tax efficient portfolios. In the future, the company expects to combine OpenInvest’s values-aligned capabilities with 55ip’s tax-smart investment strategies to deliver customised solutions to Private Bank and Wealth Management clients.
Keeping up with the competition
OpenInvest is the third fintech firm acquired by J.P Morgan this year; only weeks earlier the company announced its acquisition of Nutmeg, an award-winning investment provider, to break into the retail wealth management sector in the UK. Traditional banks are gradually being threatened by virtual financial institutions and fintech startups as the demand in online banking rises. The bolt-on acquisition of OpenInvest will allow JPMorgan to expand its services and secure their position in the increasingly competitive consumer banking sector.
When will the deal go through?
The terms of the arrangement were not disclosed but the deal is expected to close in the third quarter of 2021.
Barbara Cannady
Sources:
https://www.investopedia.com/how-jpmorgan-makes-money-4798002
https://finance.yahoo.com/news/j-p-morgan-agrees-acquire-103000669.html
https://www.benzinga.com/fintech/21/06/21766199/jpmorgan-to-buy-fintech-company-openinvest to-better-serve-wealth-management-clients
https://www.cnbc.com/2021/04/30/theres-no-hotter-area-on-wall-street-than-esg-with sustainability-focused-funds-nearing-2-trillion.html
https://www.nerdwallet.com/article/investing/esg-investing
https://citywire.co.uk/wealth-manager/news/jp-morgan-chase-to-acquire-nutmeg/a1520334? ref=wealth-manager-most-popular-list
https://fintechmagazine.com/financial-services-finserv/partnerships-and-growing-fintech-ecosystem
https://www.cnbc.com/2021/06/29/jpmorgan-is-buying-an-esg-investing-platform-in-banks-third fintech-acquisition-of-the-past-year.html
https://www.pymnts.com/news/banking/2021/the-creative-destruction-of-banking-aspirational-or an-ultimatum/
