Why do acquisitions?
We have just completed a great acquisition: great for us and great for the acquired business. How can I be so sure?
Well, when people make acquisitions, they often draw up a long checklist of things to look for in a business. They seek perfection. They want a business that can make good profits, has long-term recurring revenues, a great team of people and a best-in-class product that fits perfectly with their own products and technology all at a reasonable price.
Then of course reality sinks in and they can’t find such a business, can they? Well, we were bowled over to find Investor Analytics, which just seemed to have everything we wanted. Buying a business or being bought is not a simple objective process. Even though we tell ourselves that a business is an asset, it is an asset whose quality is determined by the quality of the people and the relationships that you form with those people. The better the relationships, the better the asset will get. One can compare a merger to a marriage, but it isn’t. You can compare it to buying the right car, but it isn’t. It is some mix of the rational and the emotional. These two things are inseparable and if you get the right balance, then the acquisition will work.
So what are the attributes of Investor Analytics?
With Investor Analytics we found a business that had a great product that does what we don’t do. It is very focused on risk and offers both a factor-based model and a Monte Carlo model. We have a Historical Simulation model for our risk service. Interestingly, both companies have lost deals over the years because each of us did not offer the other’s model. With the two products together we cover all the require risk models for the asset management market.
We have invested significant sums in our new cloud based, multi-tenant technology over the last 8 years because we do not want to deploy software, but rather offer our clients a service. Investor Analytics also has a cloud based, multi-tenant technology and this compatibility is really essential as it means that integration will be swift and we will not need to rewrite their product to get it onto our platform.
The right culture
The culture of Investor Analytics is what we like too. The people are very smart and they enjoy the challenges that a service like Investor Analytics creates. It was clear from the outset when the people from Investor Analytics met the people from StatPro that there was huge respect on both sides. People were proud of what they had built, open about weaknesses and ambitious to create the best possible service. By joining forces, we also can focus each team on their respective strengths whilst leveraging the qualities of the other side.
Acquisitions have to make financial sense as well. Here the sellers got the price they wanted and we were happy with what we paid. Combined with StatPro, Investor Analytics will be a more profitable company. What is more, the cross selling opportunities are huge. 80% of StatPro’s clients have an equity bias and whilst Investor Analytics’ risk product is multi-asset it is really perfect for equity investors. So we think that many of our clients will be pleased to be able to have performance, attribution, compliance and multiple risk models all on one platform. They will be able to minimise data management, outsource IT, rationalise reporting, get more and pay less. The same goes for all of Investor Analytics’ 50+ clients.
I think that we are lucky to find a company that fits our needs so well. When so many things fit, it has got to be a good thing. Investor Analytics will enhance StatPro’s products and our earnings now and more so in the future: This is a solid basis for a great acquisition.