The slowdown in startup funding is pushing the market toward consolidation, with small and medium-sized players who are unable to obtain additional investments on good terms, preferring to be acquired by larger competitors. Today (Tuesday) the Israeli start-up Rewire announced its acquisition by the public American company Remitly, in a deal worth 80 million dollars that combines shares and cash. The buyer and the acquired are both engaged in the field of international money transfers with specialization in the migrant worker population.
Rivier has raised $62 million since its inception, so the current deal does not reflect a significant return for its shareholders. However, Rivire shareholders could choose to receive Remitly shares in the deal and watch them rise in the future to earn more.
Remitly was issued on Nasdaq in September of last year, and like quite a few fintech companies, its stock has since been cut by 75%. Today it is traded at a value of 2 billion dollars.
“We weren’t looking for a sale, and it was Remitli that approached us with the offer,” says Guy Kashtan, the CEO and one of the founders of Rivire. “From our point of view, this is an amazing deal for all parties, and considering the current state of the market that makes it difficult to raise financing, the price of the deal is a success.”
The transaction is subject to final closing conditions, including the approval of the authorities in Israel and the Netherlands.
A competitive market with huge players
Rivire was established in 2015 by Kashtan together with Adi Ben Dayan (Vice President of Development), Saar Yahlom (VP of Technologies) and Or Ben Oz who retired from the company. The main activity of Rivire is transferring money to migrant workers in Israel and Europe who send money back to their country. In Israel, Rivier transfers funds to workers from countries such as India, China, Thailand, the Philippines and Nigeria.
The international money transfer market is very competitive, and the level of fees in it is on a downward trend. In this field, you can find old and big players such as Western Union and MoneyGram, alongside younger alternative companies such as the British Wise (formerly TransferWise), which is traded at a value of 6.7 billion dollars on the London Stock Exchange.
Because companies like Rivier have to pay to use the pipes to move the money, their margins on each transaction are relatively small. Customers are also not committed to one company for a long time and move from service to service easily, which constantly requires marketing. Under these conditions, in order to reach profitability, companies must first accumulate a significant volume – which Riviere did not have.
According to Kashtan, the difference between Rewire and Remitli and the other players in the market is their specific focus on providing a response to migrant workers and their unique characteristics. Rivier launched another series of additional services for migrant workers alongside the transfer of funds, such as purchasing insurance.
The buyer will increase activity in Israel
Rivier employs 130 people, the vast majority of them in Israel. Kashtan says that the goal of Remitli, which employs 2,200 people, is to keep a development center in Israel and even expand it. To prevent abandonment, the acquiring company allocated stock incentives to Rivier employees. From a product point of view, in any case, Rivier’s brand will soon be effective and will become retail.
Part of the reason for the purchase is Remitly’s desire to strengthen its position in the migrant labor market – the foreign workers in Israel. Rivier has several tens of thousands of customers in Israel and Europe.
“Remitly’s goal is to have a development center in Israel. Our products complement Remitly, and we have features they don’t have, such as the possibility of opening a virtual bank account for money management by the foreign worker,” says Kashtan.
According to him, the transaction was unanimously approved by the Rivier board of directors. Rivier’s investors include Viola Fintech, Migdal Insurance Company, Monte Capital Fund, Gillot Capital Fund and OurCrowd. Among the early investors in the company are the founder of Yahoo Jerry Yang and Yehuda Zisafel, one of the founders of the Red Binat group.