NovaSparks Gets New Backer in MBO Deal, Eyes Options Data & FPGA Trading Capabilities

NovaSparks has completed a management buy-out (MBO) from its former private equity owner, and found a new backer to help accelerate its expansion, while growing employees’ stake in the company.

The move gives French asset manager Peninsular Capital control of 51% of NovaSparks, which specializes in field-programmable gate array (FPGA) ticker plant and feed handler appliances. Additionally, existing management and staff will double their stake from around 20% to just over 45%. Michaël Lévy, a 30-year veteran of the foreign exchange and asset management industries, who joins NovaSparks’ board to help the vendor identify and grow opportunities in the London market, will also receive a small percentage of stock in the company.

Terms of the deal, including the amount of money invested, were not disclosed, though Peninsular’s target companies range from €5 million to €50 million.

NovaSparks CEO Luc Burgun (pictured) says that when previous owner Partech Partners decided to sell its stake in NovaSparks late last year, the vendor decided to pursue an MBO with assistance from another private equity company.

“Since the company has been profitable for the past five years, it was an opportunity to find PE firms who were interested in our story,” he says. “Peninsular Capital are good people, very relatable. We’re in the trading business … and they understand trading. So when we were explaining what we do, they got it very quickly.”

Burgun says Peninsular has an investment horizon of four to five years, giving the vendor that long to complete a series of initiatives—some already underway, and some planned for the longer term—to grow the company.

These initiatives include expanding its coverage of options markets, consolidating data across markets, and expanding its trading capabilities.

Burgun says options markets and market consolidation are immediate opportunities for the company to grow over the next two years. By supporting more options market data feeds with its ticker plant, NovaSparks can bring the high-throughput benefits of FPGAs to analyzing and constructing order books in the high-volume options markets, where software solutions may not be able to process the volumes of data required. Meanwhile, by combining streams of data from different exchanges already normalized by its feed handlers, the vendor can go beyond creating best-bid-and-offer prices to building full-depth consolidated order books that provide a full view for each instrument or asset class across multiple markets.

Over the longer term, the vendor plans to provide FPGA-based trading capabilities across markets from which it already collects market data. NovaSparks currently supports 70 exchange feeds, and already has existing order management solutions for trading on Nasdaq and CME Group, and plans to expand this into a fully-fledged trading system with the ability to manage order execution across more exchanges, expanding both its functionality and market coverage.

Even though the company now has funding to potentially make acquisitions, Burgun says it will focus on growing organically, and is confident of delivering good growth over the next three years. Any mergers would take time to integrate and would mean extending the investment horizon, he says, though the vendor remains open to opportunities with companies providing complementary products or that could provide access to complementary datasets.

For example, NovaSparks has begun developing pre-trade risk functionality running on FPGAs, but given the complexity of risk analytics, Burgun cites this as an example where it may make sense to acquire a company that already performs this.