Toronto AI company Zafin makes first major acquisition since private equity takeover

Zafin Labs Americas Inc., a Canadian vendor of artificial intelligence tools for financial institutions, has made its first major acquisition since being taken over by a Swedish private equity firm in 2024.

The Toronto-headquartered company paid an undisclosed nine-figure sum in U.S. dollars for Naehas, Inc., a roughly 250-person company based in Palo Alto, Calif., that generates between US$30-million and US$50-million in annual revenue. Naehas provides software that banks use to send digital, personalized marketing offers to customers while staying onside with their regulatory obligations.

The acquisition of Naehas, announced Monday, adds “a fourth pillar to our strategy and significantly expands our overall addressable market,” Zafin chief executive officer Charbel Safadi said in an interview. Once the deal closes, Zafin will have 16 of the top 20 U.S. banks as customers, he added.

Mr. Safadi said Zafin paid for the acquisition with a combination of cash – partly financed by its line of credit – and equity.

Zafin, founded in 2002, was a low-key but prosperous software provider to financial services companies before Stockholm-based Nordic Capital bought majority control in an early 2024 deal that valued the company at more than US$500-million.

Mr. Safadi, a former senior executive with IBM Canada, joined as president a year before the takeover and succeeded co-founder Al Karim Somji as CEO as Nordic took over. Mr. Somji’s co-founders Denish Krishnan and Anugopal Venugopalan are Zafin’s chief commercial and risk officer and chief revenue officer, respectively.

Zafin helps banks compete against fast-growing digital rivals by offering an AI-infused cloud-based software platform that connects to the institutions’ cumbersome, complex systems, acting as an external layer for them to automate a range of customer-oriented tasks. Those include building and implementing personalized digital offerings, such as cash-back promotions or other customer bonuses. ING Groep NV, Barclays PLC, HSBC and several domestic financial institutions, including Canadian Imperial Bank of Commerce, are clients.

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As AI adoption has swept across the business landscape in the past four years, Zafin has increasingly pitched its platform as a way for regulated institutions to deploy and monitor the use of AI technologies for sensitive customer-facing applications. That includes Zafin’s recent introduction of a product called AIOS, which helps regulated institutions orchestrate and strictly govern their various automated AI agents, models, tools and workflows, providing a documented explanation for senior leaders or outside regulators to see how the autonomous agents made their decisions.

Mr. Safadi said the company has also leaned heavily into incorporating AI into its own workflows as “an accelerant to growth,” adding 70 AI engineers in the past six weeks to bring its staff count to more than 1,000 (excluding the Naehas deal, which is expected to close in 2026). Zafin acts as “patient zero” for all autonomous agents it generates, implementing them within its own operations before offering them to customers, he said.

Zafin has more than doubled sales since the Nordic deal and is on track to reach US$200-million in annualized, recurring revenues by the end of this year. It generates more than half its revenues in the U.S., less than 10 per cent in Canada and the rest from other countries, including South Africa, Australia, the United Arab Emirates, the U.K. and several in Europe.

In addition to growing revenues by between 30 per cent and 40 per cent annually, Zafin’s operating profit margins exceed 20 per cent, ranking it as one of the most successful software companies by what is known as the “rule of 40” measure. Subscription software companies whose rate of revenue growth plus their operating margin exceed 40 per cent are considered to be top performers. Zafin is running at more than 50 by that measure.

Mr. Safadi said Zafin could make one to three more acquisitions in the next year, “but they won’t be significant in size or scale,” and the company plans to grow primarily by expanding sales of in-house products.