A deal has been agreed in principle for Ion Group to buy Dash Financial from private equity firm Flexpoint Ford, WatersTechnology can reveal—the latest in a stream of deals for the fast-growing tech titan, and one that expands its services in options trading.

The purchase had been rumored in recent days, with four sources telling WatersTechnology a deal was in the offing. A spokesperson for Ion confirmed some of the details today. An acquisition agreement was signed in December and is expected to close in the second quarter, pending approval from Finra.  

Dash was launched in 2011 by Peter Maragos and David Karat under the premise of bringing transparency and customization to options execution. The company’s suite of products includes Sensor, its multi-asset, algorithmic execution platform; Dash360, its visualization and analytics tool; BrokerPoint, its options routing network; Blaze, its order and execution management system; and Dash Prime, an introducing prime broker. According to the company’s website, it routes about 16% of the daily Options Clearing Corporation volume. In 2018, Maragos and Karat partnered with Flexpoint Ford in a management-led buyout of Dash from private equity firm GTCR.

The spokesperson says Maragos and Karat will remain with the company after the deal closes.

“The Dash team sought a permanent strategic partner that would allow it to continue its investment in product growth and global expansion while also serving customers of all types—small broker-dealers, hedge funds, asset managers, and large investment banks—in an agency capacity,” Hishaam Caramanli, chief product officer at Ion, tells WatersTechnology. “Ion enables this and more, and we look forward to soon welcoming the team to the Ion Group.”

Financial terms were not disclosed, and sources were not able to confirm a price, though one source with knowledge of the acquisition says that while they haven’t heard the exact price, “it’s a lot of fuckin’ money.” A second source says the Dash asking price was in the range of $700 million, but that for this deal they believe it to be closer to $500 million. Last September, Barron’s reported that Dash was the “latest fintech up for sale,” and sources said that the trading platform and execution services vendor was expected to sell for $700 million to $1 billion.

Expansion through acquisition

In the world of fintech M&A, Ion has been one of the most aggressive acquirers, with most deals backed by debt. Over the last 15 years, the company has acquired over 20 companies, including Fidessa, Broadway Technology, Openlink, and Allegro. In December, Ion sponsored a $500 million listing of a special purpose acquisition company with the US Securities and Exchange Commission (SEC) to help fuel further acquisitions. 

“Ion certainly has been buying up many sell-side assets, so there’s no surprise here,” says Brad Bailey, research director of consultancy Celent’s capital markets division. “For every asset class, every piece of the trading infrastructure, [Ion] just keeps adding to it. Broadly, legacy fintech has been flowing into a few hands, and Ion has been one of those hands that’s been picking up a tremendous number of pieces across asset classes.”

With its options heft, sources say Dash will fit nicely alongside the Fidessa offering, as Ion looks to expand its sell-side presence. “Ion is typically in fixed income, so this will complement Fidessa,” says one of the sources with knowledge of the deal. “It looks like Ion wants to own the sell-side technology space.”

Still, reaching that pairing has not come without turmoil, which could hint at what’s to come at Dash.

Fidessa is a long-time favorite order management system on the sell side, and one of Ion’s most high-profile acquisitions in capital markets technology. In the first year following the deal’s close in the summer of 2018, around a quarter of Fidessa’s global workforce—then consisting of between 1,700 and 1,800 employees—had either resigned from the company voluntarily or were laid off.

A follow-up WatersTechnology investigation found employee morale had suffered, and multiple reports—from customers and from within the firm—said that service standards had dipped. Ion insisted customer service and satisfaction had improved.

Cuts continued last year, WatersTechnology has been told, albeit affecting far smaller numbers. According to two sources who were employed at Fidessa last summer, one of whom was since made redundant, the number of new layoffs totaled less than 20 across the firm’s UK positions—the threshold level that would require group consultation—on top of an unknown number in the US and Asia. Of course, Fidessa was far from alone in making cuts during the pandemic.

The fixed income front

And then there was the Broadway deal.

One year ago, Ion announced the purchase of the foreign exchange (FX) and fixed-income trading platform provider, but two months later in April, the UK Competition and Markets Authority (CMA) said Ion had failed to comply with a notice calling for “information and documents” in time, which extended the regulator’s examination of the deal. In July, the CMA found that Ion’s purchase of Broadway Technology raised competition concerns in the supply of electronic trading systems for fixed income, but not FX.

A month later, it was decided that Ion would split up Broadway to allay concerns the deal would erode competition between fixed-income trading software providers, keeping the FX business while finding another buyer for Broadway’s fixed-income franchise. Finally, in November, the CMA approved the acquisition on the proviso that Ion sell Broadway’s fixed-income business, including the underlying software and brand, to a consortium led by Broadway CEO Tyler Moeller.

Competition concerns have long swirled around Ion. As was first reported jointly by WatersTechnology and Risk.net in November 2019, a group of European and UK banks is considering building its own fixed-income trading software in a move that would allow the institutions to cut ties with Ion.

“All banks need to be more efficient, so when you have a player that’s as dominant as Ion, it’s a worry for everyone,” said an e-commerce specialist at a bank, at the time. “It’s in the industry’s interest to have more competition.”