Assessing SS&C's Insatiable Appetite

Citi fed the beast this week.

For most of this year, it's been a fairly open secret that Citi was looking to sell off its Alternative Investor Services unit — and new ownership is lined up. Tim takes a look at SS&C's latest gambit.

SS&C made big waves earlier this year when it threw a cool $2 billion — or a little more, actually — at Advent Software. At least one source at an Advent competitor told me that was twice what his firm would've been willing to pay for the company, but Advent had quietly been on the market for some time, so when things started coming together for a deal, they moved pretty quickly (at least for a transaction of this size). It's still unclear exactly how that new SS&C property will, or won't, change as a result of the buy. But when I spoke to Advent's Jan Dinger at our recent Waters Rankings event, he was keen to ask me about the opinions I'd been hearing, and the industry's perception of the deal. Clearly, they're aware that everyone is watching this one very closely. Trimming Down The same could be said of the news out this week that SS&C will scoop up Citi's Alternative Investor Services unit for$425 million.

The sheer breadth of providers now under SS&C's umbrella could make for some interesting value propositions. One could argue that Bill Stone's Windsor, Conn.-based holding company — with its GlobeOp fund administration arm, Advent, and now the Citi unit — is approaching the size and capability of the largest buy-side servicers on the Street (think State Street, Northern Trust).

A number of banks have been looking at dumping these businesses as they trim their balance sheets and remove "non-core" assets that, in many cases, return fairly narrow margins anyway. But as one of the larger among these banks, Citi's was the most gossiped about.

In fact, the sense of uncertainty around the issue over the last year or so has had many fund servicers looking to swoop in and pick off Citi hedge fund clients, as the chief technologist at one such shop told me earlier this summer.

And so it's once again fair to question: what is SS&C buying here, what's the plan for it, and considering those two answers, have they paid too much?

On one hand, the sheer breadth of providers now under SS&C's umbrella could make for some interesting value propositions. One could argue that Bill Stone's Windsor, Conn.-based holding company — with its GlobeOp fund administration arm, Advent, and now the Citi unit — is approaching the size and capability of the largest buy-side servicers on the Street (think State Street, Northern Trust).

On the other hand, building as SS&C has — almost exclusively through acquisition — has left a ton of questions about how to pull these different properties together in a coherent way, or whether in doing so, they might potentially create a mess that lowers service level and finds key staffers (and soon after, clients) heading for the door.

Early Indications

It's a tricky problem. The firm recently announced a new hire, Bob Shepro, to lead a combined Private Capital offering, and Shepro expressed that indeed, systems from different parts of the portfolio would be brought together as part of the new plan. In light of that, the Citi buy makes a lot of sense as a potential base upon which the rest of the platform could be built up.

But by and large, it seems for now that SS&C is relatively happy keeping the branding and operations for most of these various pieces of the puzzle separate.

It should be interesting to see a year or two down the road whether that remains the case.

That is, of course, if SS&C doesn't own the Brooklyn Bridge, Incisive Media, and all the Queen's corgis by then, too.

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