Read the article and learn about:
- What is causing the recent spell of M&A?
- The increasing market appetite for a consolidated approach that offers a holistic solution
- The different types of front-to-back offerings now available in the market
The buy side industry has seen disruption from all corners in 2018. From implementing gargantuan regulations like MiFID II and GDPR, to handling technology innovation such as blockchain and AI, and now M&A fever. You’ve most likely heard of the two major acquisitions that have taken place most recently. Last month, State Street Global acquired Charles River Development in a landmark USD 2.6 billion deal, while SS&C acquired EZE only a few weeks later. These aren’t just symptomatic of regional M&A trends either. Earlier in the year Ireland’s Ion Investment Group fiercely fought off Temenos to buy Fidessa for a record GBP 1.5 billion, having already ticked off a wish list that includes several treasury management solutions from; OpenLink Financial, IT2, Financial Software Systems and Wall Street Systems. But what’s causing this onslaught of M&A?
I think it’s fair to say that the consolidation in the industry is a direct result of shifting customer demands. With greater pressure now than ever before, firms today are recognizing the limitations of their current investment technology. They want to reduce complexity, reduce costs, reduce operational risk, and more importantly improve profitability, through new business opportunities that their current technology stack simply cannot deliver. And they need it now, not only to survive today but to thrive tomorrow.
Commenting on the recent deals, Spencer Mindlin, Capital Markets Analyst at Aite Group put it rather nicely in a recent article on Markets Media. He stated that, “Vendors realize that clients are looking to reduce their IT costs and risks. Clients are now drawn to global, multi-asset, front-to-back solutions with lower total cost of ownership. ”This is the ultimate driver behind these deals. A consolidated approach that offers a holistic solution to the buy side challenge. These acquisitions are now driven more by long term goals than the acquisitions of the past, which often concentrated on short term payoffs. And so off goes the bandwagon, where many tech vendors are scrambling to buy their way out of years of underinvestment, to effectively deliver the whole investment chain, front to back, in one offering. But what does front-to-back really mean? And does a series of acquired systems stitched together really ensure the operational ease, cost savings and risk reduction the buy side needs to operate competitively, in the same way a single integrated system can deliver?