Several financial technology vendors have been acquired in recent months as large IT firms have looked for ways to capitalize on structural changes in the financial markets.
Markit made two deals in August, buying DealHub and CoreOne Technologies. Computer Services Group bought Fixnetix in August, FactSet bought Portware in September and Fidelity National Information Services made the biggest splash of all, announcing an agreement in August to buy SunGard for $9.1 billion.
One of the main drivers for the recent wave of deals was the recognition by larger IT firms that banks and other market participants are looking for ways to reduce their operational costs by outsourcing key elements of their trading infrastructure. The IT companies are now snapping up specialist providers to capture a piece of this trend.
Perhaps the best example is the acquisition of Fixnetix by Computer Sciences Corporation, a publicly traded corporation with 70,000 employees worldwide and more than $12 billion in annual revenues. When CSC announced the deal in August, it said it fit into a broader strategy to provide managed services to the financial markets.
“Fixnetix will be a key component to the implementation of our infrastructure strategy and will advance CSC as a leader in providing managed services to capital markets firms throughout the world,” said Steve Hilton, CSC’s executive vice president and general manager for global infrastruc- ture services. “This is a transformative market that is ready to embrace an as-a-service utility model and CSC is uniquely positioned to make this happen with the addition of Fixnetix.”
Natural Next Step
Fixnetix is based in London and provides market data, tracing access and pre-trade risk management for banks, hedge funds, proprietary trading firms and other participants in exchange-traded markets. It specializes in providing low-latency market access through co-location and proximity hosting and was one of the first firms to commercialize FPGA technology for low-latency trading purposes. The company claims its iX-eCute microchip is one of the fastest pre-trade risk systems in the world, with the ability to make multiple risk checks in less than 10 microseconds.
“Becoming part of CSC represents the natural next step for Fixnetix,” said Hugh Hughes, the chief executive of Fixnetix. “We will gain the resources that we need to better respond to market demand, effectively address bigger deployments and build on our established success.”
In contrast, the acquisition of SunGard is a case of a large firm being swallowed up by an even larger firm. SunGard offers a wide array of financial software, including software widely used for trade processing in the listed derivatives markets and serves 14,000 customers in more than 100 countries. Its acquirer, Fidelity National Information Services, is a member of the Fortune 500 and a global leader in banking and payments technology. The deal was announced in August and is slated to close by year-end.
One of the main drivers for the recent wave of deals was the recognition by larger IT firms that banks and other market participants are looking for ways to reduce their operational costs by outsourcing key elements of their trading infrastructure.
FactSet is another big IT company that is moving into the trading infrastructure space. The company, which is headquartered in Norwalk, Conn. and offers a wide range of financial information and analytics, announced on Sept. 22 that it had acquired Portware for $265 million in cash.
Portware was founded in 2000 and provides a broker-neutral execution management system for equities, futures, options and foreign exchange. The company’s primary clients are asset managers, trading firms and bank trading desks, and its flagship product, Portware Enterprise, is designed to act as a central platform for the creation and execution of algorithmic trading strategies. A key feature of the platform is its open API, which allows for integration with a host of third party applications and systems.
Founded in 1978 and public since 1996, FactSet has 2,700 corporate clients and 62,000 individual users. The company said the acquisition of Portware will expand its client list and strengthen its suite of desktop analytics and data feeds. “Portware’s tools and expertise in trading are an exciting complement to our current offerings,” commented Philip Snow, FactSet’s chief executive officer. “We are excited to enhance the productivity of FactSet users as we integrate Portware into adjacent workflows within our client base.”
In the case of Markit, the company used its two acquisitions to strengthen existing business lines and expand its customer base. DealHub is a software company that provides post-trade solutions and a trading connectivity platform that are widely used in the global foreign exchange markets. Markit executives said the combination of DealHub’s technology with Markit’s network will accelerate the development of Markit’s FX trade processing services and expand its customer base among banks in the FX markets.
Accelerate Growth
“DealHub is a great company and highly complementary to Markit’s growing FX processing business. This acquisition adds depth to our FX offering while bringing an exciting set of trading solutions to Markit,” said Brad Levy, head of Markit’s processing division.
CoreOne Technologies is a provider of regulatory reporting, index management, data management and prime brokerage services. The company, which is based in New York and has 200 employees worldwide, has more than 500 customers including banks, asset managers, sovereign wealth funds, custodians and exchanges. Lance Uggla, Markit’s chairman and chief executive officer, enthused about the $200 million deal in an August announcement, saying CoreOne’s “dynamic, entrepreneurial culture” will be a “great fit” for Markit and will enhance several of its existing business lines.
“Their services will strengthen our offerings and will allow us to better serve our customers,” Uggla said. “The transaction is consistent with our long-term strategy to accelerate organic growth through acquisitions and will enhance our position as a leading provider of financial information services.”
