When JC Flowers acquired the UK’s Interactive Investor in 2017, its number one priority was to boost scale to help turn around the struggling online retail investment platform into an efficient, profitable and competitive player in the sector.

The firm had a lot of work ahead of it, including major upgrades to the company’s technology infrastructure. What it wasn’t ready for, like most companies, was a global health crisis that shut down much of society. Ultimately, an unexpected consequence of the pandemic was that more consumers stayed at home and started taking more direct control of their trading activities.

After a four-and-a-half-year hold period, the New York-headquartered firm received just over $900 million of proceeds from invested capital of $100 million after the sale to Abrdn. Despite a highly competitive market space, Interactive Investor grew from a loss-making enterprise to a platform with more than 18 percent of the ­direct-to-consumer market share.

According to sources familiar with the transaction, JC Flowers received a gross multiple of approximately 9x its invested capital.

Plan of attack

“We saw an opportunity to create a scaled player through a combination of organic growth and the consolidation of struggling smaller players,” says Tim Hanford, co-president of JC Flowers and managing director in charge of the firm’s Europe operations.

“It was a very intense project, working at pace both on M&A and the development of the platform”

Tim Hanford, JC Flowers

Among its problems, Interactive Investor struggled with a decade of low interest rates, which led to unprofitability, Hanford says.

To cure that, JC Flowers had to work on a set of organic strategies to improve efficiency. “We built the business as a technology platform, an extension of market structure to the consumer. This meant that with efficiency and scale the company could be highly profitable without material interest rates,” says Hanford.

Growing scale also meant being active on the M&A front. JC Flowers entered the online retail investment market by acquiring TD Bank’s UK direct-to-consumer trading business. After smoothing out operations, JC Flowers then worked with Interactive Investor to execute three acquisitions: Alliance Trust Savings (May 2019), The Share Center (July 2020) and EQi (March 2021).

The three acquisitions scaled Interactive Investor’s customer base, which was approaching almost half a million customers. Interactive Investor closed non-core businesses of the acquired companies and focused on developing new skills that helped the company grow.

Tweaking the tech

Technology also played a part. The main technological developments focused on upgrading the data architecture and data capabilities. The company also improved the user experience so that it felt more natural, in part through a combination with Salesforce, which created a better customer relationship management system, Hanford says.

Besides the low interest rates that were prevailing at the time, the covid pandemic was another potential challenge. However, the health crisis turned out to be good for growth for the investment platform sector in general, Hanford says. He adds that moving to remote work was not so daunting because of the upgraded technological infrastructure.


Gross multiple JC Flowers received on its invested capital


JC Flowers’ proceeds from invested capital of $101m


Interactive Investor’s direct-to-consumer market share

Also, people became interested in trading more actively during the pandemic. “When they looked for the best platform, they would consistently encounter our digital marketing, so we saw particularly good growth in new customers and in activity levels during the pandemic.”

To smooth things over, Hanford credits the management team for operating the company through the many changes and acquisitions, which took a lot of time and focus. “They did a really terrific job,” he says. “It was a very intense project, working at pace both on M&A and the development of the platform.”

Turning to valuations at exit, Hanford describes Interactive Investor as a “unique property,” and that for people who wanted this kind of business in the UK, the only other option was to go and buy companies from the stock market.

“Whilst exploring the IPO we identified some buyer interest, including from Abrdn, who were very clear that this was strategically important,” he says. “We entered into discussion with them and quite rapidly agreed on a fair transaction.”