Fidessa Plot Thickens

Blog entry

Fidessa has revealed that ION Trading, a vendor of trading software, and SS&C Technologies, a provider of investment management software and services, are the new suitors attempting to woo the firm away from its acquisition deal with Temenos, which was due to be voted in today – but as competition escalates, who will come out on top?

ION Trading was suggested by analysts as a possible counter-bidder at the time of the Temenos bid to acquire Fidessa back in February and made it onto our top list of potential candidates yesterday after news broke of the new offers. The Dublin-based firm could represent a better fit for Fidessa than Temenos, given its market position and previous acquisition trail.

SS&C could also be a good fit, although its acquisition history to date has focused more on the buy-side.

ION Trading was founded in 1999 and is headed by CEO Andrea Pignataro. The company has built on its original ION Trading business to offer a full suite of trading, risk management and treasury management solutions. Within the trading segment, the company offers interfaces to multiple markets across multiple asset classes, automated trading and market making tools, STP, auto negotiation and flow analysis. It also offers pricing engines, position keeping, trade entry, risk management and P&L calculation capabilities – all of which sit nicely with the Fidessa offering.

Over the past decade, ION has quietly stacked up its influence in the trading space through a series of low-profile yet strategic acquisitions. In 2008 it purchased back-office software firm Rolfe & Nolan and in 2011 followed that up with the acquisition of trading tech vendor Wall Street Systems, which gave ION new capabilities in data capture, post-trade functionality, and treasury solutions.

In 2012 London-based Patsystems became the next target, bringing software solutions for high-performance electronic trading and exchange systems, while 2013 saw ION step up the pace with a spending spree that included the purchase of US-based Financial Software Systems, UK derivatives trading vendor FFastFill, and commodity management software provider Triple Point Technology. In 2015 it bought Caplin Systems, a provider of single dealer portal platforms, in 2016 it acquired Reval, a cloud-based firm focusing on treasury and risk management, and in 2017 it took a controlling stake in financial analytics firm Dealogic for $870 million. In February 2018, ION acquired trading and risk management cloud provider OpenLink.

At first glance, ION looks like a good match for Fidessa, but it still faces some stiff competition. Like ION Trading, SS&C has executed a strategy of aggressively inorganic growth that has seen 27 companies acquired since 2008. Many of these have focused on the asset and wealth management space however, in 2016, the company acquired Citi’s Alternative Investor Services Business and Wells Fargo’s Global Fund Services Business along with independent asset services firm Conifer Financial and CRM solution Salentica. In 2017, it followed up with Modestspark, a digital service provider to financial advisors and wealth management firms, and Canadian fund administrator CommonWealth Fund Services. In March 2018 it agreed to acquire the North American Fund Administration Business from CACEIS (Crédit Agricole), while the firm is also in the process of acquiring information processing firm DST Systems for almost $5 billion in a bid to move into the retirement and wealth management space.

Temenos, the initial bidder for Fidessa, is a very different animal – a core banking software vendor with limited experience in electronic trading systems. Doubts have already been raised over how it could effectively integrate Fidessa without an underlying change in strategy.

Previous Temenos acquisitions have centered around the banking space. In 2017, it bought Australian financial software provider Rubik, which focuses on banking, wealth management, and mortgage broking solutions in Australia and Southeast Asia, while in 2015 it acquired North American banking software vendor Akcelerant. Previous purchases have included compliance and core processing provider TriNovus and Canadian business intelligence vendor Primisyn, while in 2012 it tried but failed to merge with rival banking provider Misys. Fidessa, while not entirely unfamiliar, represents a fairly radical diversion from the core focus of the firm.

So who will come out on top? For now, it looks as if ION Trading could have the edge – its offer of £37.50 per share (plus dividend) adds a 5% premium onto the £35.67 bid from Temenos. However, SS&C have not yet come out with a formal offer – and with a public equity offering of $1.25 billion currently underway, the group could soon have a substantial pile of cash to play with.

In happy news for investors, the bidding war has already pushed Fidessa shares above the £40 barrier – up 9% since the news broke on April 3rd and a jump of 37% from the January 2nd share price of £25.60. Could this be an indication of further bids to come? FIS is still an option, while IHS Markit could be another possibility – the firm has been widely expected to re-enter the M&A space with a renewed war chest following its merger in 2016. With another three weeks to go before the Temenos agreement expires on April 27th, there could still be everything to play for.