Mergers and Acquisitions in the Risk Technology Industry

Historically, the financial services sector has spent more money on information technology than any other vertical industry. In the current climate of steep credit losses, alongside pressures for cost reduction, many IT vendors are experiencing marked reductions in sales to firms in the banking, capital markets, insurance and asset management industries.

However, the risk technology sub-sector is proving to be counter-cyclical. The need for greater transparency and governance is fuelling demand for risk management consulting, which is consequently leading to requirements for modern and advanced risk management systems. Furthermore, the traditional silo-based approach to managing risks is being questioned by many auditors and regulators. In the future, financial institutions need to implement enterprise-wide risk management systems for managing credit risk, market risk, operational risk and fraud across multiple business units and product-lines, presenting a unified and consistent view of all risks and exposures. This information is essential for assessing capital and liquidity requirements for all financial institutions.

This report examines some of the key trends and drivers in this market place, covering strategies, potential buyers and sellers, “marriages made in heaven”, example deals, benchmark valuation metrics and best-practices. Particular attention is given to the role of leveraged buyouts (LBOs) and strategic acquisitions; they are highly relevant in the risk technology sector.