There had been speculation in the City for a while that Fidessa was being courted by a number of suitors.
I heard two names on a number of occasions, one of which was Temenos (obviously), while the other isn’t worth mentioning, given that we now know that Fidessa is being prepared to bed down in the Geneva-based banking specialist’s stable.
Sentiment drives the capital markets and people’s perceptions drive their sentiment. That is a given. One has to look no further than Fidessa’s share price to observe this phenomenon: The London-based firm’s shares have risen by the best part of 50 percent since the rumor mill in the City started turning on the back of speculation that Temenos was about to snap up Fidessa.
When it comes to the third-party technology vendor landscape, people’s perceptions about technology firms are their realities. It doesn’t matter whether those perceptions are shaped by fact or something more nebulous like a hunch—if that is how people perceive a brand or a product, for them, it is real.
So what we know about Fidessa? Its name is synonymous with its extensive trading network (the Fidessa Connectivity Network), while other offerings include its Fragmentation Index and its Tradalyzer service. Its buy-side presence is thanks to its outstanding Sentinel compliance platform, which has won numerous Buy-Side Technology awards over the years, supported by Minerva, an order management system, and Terreract, which together formed the heart of the Capstone platform back in the LatentZero days and which now have been folded into the firm’s Investment Management Solution.
Its buy-side offerings were acquired in April 2007 from LatentZero, a move that turned out to be a good one for both firms—Richard Jones, LatentZero’s then-CEO was keen to exit the industry (apparently he tried his hand at being a full-time cricket umpire) and the feeling was that the firm has pretty much reached its growth capacity. In order to kick on to the next level it needed to be part of a far larger entity with deeper pockets and greater ambition. It found those ingredients in Fidessa, which, to its credit, did not tamper (too much) with the LatentZero products.
In recent times, however, key staff members have left the organization—Robin Strong exited the business a while back and more recently, Simon Barnby, who was part of the business back in the good old days when Fidessa was a product name and the firm was known as royalblue, has also recently left. One swallow (or two key staff members) doesn’t make a summer, but Strong and Barnby were two of the most “visible” Fidessa staff members, neither of whom (in my opinion) were satisfactorily replaced.
Is this a good move for Fidessa and Temenos? That depends on who you ask. Personally, I think it is. To my mind, Fidessa desperately needed an injection of energy, direction and new blood to revitalize the business, which it will get from Temenos. And Temenos, like other firms that have grown through acquisition—SS&C Technologies and FactSet, for example—gets a strong, mature sales pipeline, some outstanding products and business units, and a reliable revenue stream.
But not everyone is convinced, even though the writing was on the wall for some time.
According to an unnamed source close to Fidessa who has been following the acquisition for some time, the “fit” is questionable. “It’s been a long time coming and it’s not unexpected,” says the source. “I think it’s what the business needs to be honest—it’s lost its way a bit. The senior management has been there forever, they’ve made all their money, and it needs a bit of a shake-up; it needs to make some hard decisions about where it’s going and what it’s going to focus on—it was inevitable.”
And while the source describes the move as inevitable, he didn’t expect Temenos to be in the mix, especially when it comes to how the two entities might mesh together once the acquisitive dust has settled. “I’ve spoken to a few people and I think it’s an odd fit—I certainly didn’t expect it to come from [Temenos]. They have big banking and back-office-type systems, so maybe they’re trying to broaden their offerings by moving into a different space. But are they the right people to sort Fidessa out? It’s not an obvious fit, that’s for sure.”
Should Fidessa clients be unduly worried about the move? No, not to my mind. Temenos has a pedigree as long as your arm, in banking circles, and the top brass is well respected across the industry. So the marriage should be a good one in the short term. In the long term, however, the usual is likely to transpire: Key Fidessa staff members will exit the business over the next 24 months, operating costs will be shrunk, and synergies will be identified and exploited. After all, the blueprint for these types of deals has been refined over the last 20 years. This is just another instance of the third-party technology industry maturing.
Bryan Cross, who heads UBS Asset Management's QED group, joins to discuss alternative data and AI.Subscribe to Weekly Wrap emails
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