Unpacking the UBS-Wealthfront Deal

UBS, the Swiss banking giant, said earlier today that it would buy venture-backed robo-advisor Wealthfront for $1.4 billion in cash. Wealthfront is one of a few financial management businesses that expanded on the back of offering users automated investment tools, according to Crunchbase statistics. Wealthfront rose just north of $200 million while private, according to Crunchbase data. Other relevant plays include Betterment ($435 million in investment, according to Crunchbase) and Personal Money ($265 million in raised capital, according to the same data source).

The $1.4 billion price tag for the UBS-Wealthfront agreement is significant because it has the potential to affect the exit valuations of not only other firms, but also hundreds of millions of dollars in venture money. It is difficult to judge whether the sale price Wealthfront was able to secure was a good deal for its investors. According to PitchBook data, the company was worth $700 million in 2014 and $500 million in late 2017 when it raised its last round of cash, a $75 million amount.

The company’s departure price is a win at those prices, as it represents a twox or more multiple on the company’s final private values. However, its exit value can calculated from a variety of angles, including AUM, customers, and income. We will look at each one quickly to have a better understanding of how the company was valued in the sale and what UBS is getting out of it. Customers, AUM, and revenue, Wealthfront, according to UBS, has “over $27 billion in assets under management,” or AUM. That means UBS is paying about 5 cents every dollar of AUM at the firm. Is that a lot of money?

ZURICH, Switzerland—(BUSINESS WIRE)— UBS and Wealthfront, an industry-leading, automated wealth management service for the next generation of investors, announced today that UBS will acquire Wealthfront in an all-cash deal worth $1.4 billion. UBS will accelerate its growth objectives in the United States, widen its reach among affluent investors, and enhance its distribution and capabilities because of this acquisition. Wealthfront’s award-winning, state-of-the-art platform helps clients easily manage their wealth by providing access to financial planning capabilities, banking services, and investment management solutions. 

With over $27 billion in assets under management and over 470,000 clients in the US, Wealthfront’s award-winning, state-of-the-art platform helps clients easily manage their wealth by providing access to financial planning capabilities, banking services, and investment management solutions. Following the deal, Wealthfront and its clients will have access to UBS’s superior wealth management capabilities, including the best-in-class thought leadership of the UBS Chief Investment Officer, an unequaled worldwide footprint, and a broad product and service offering. UBS Group Chief Executive Officer Ralph Hamers said, “Adding Wealthfront’s skills and customer base to our global investment ecosystem would greatly increase our capacity to build our company in the US.”

“Wealthfront complements our core business in the United States, which provides wealth management to high-net-worth and ultra-high-net-worth investors through trusted relationships with financial advisors, and will help us achieve our long-term goal of providing a scalable, digital-led wealth management solution to affluent investors.”