Regulatory Tech

Why is GRC m&a still hot?

June 2020

Dear Clients and Friends:

We live in a world in which regulatory technology (“RegTech”) that helps companies manage Governance Risk and Compliance (“GRC”) has become an essential part of corporate management. They are no longer “optional.” Whether your focus is Financial, Legal, IT or Operational RegTech, this sector touches every aspect of your businesses, and tools have been rapidly evolving to help you meet the challenges.

As noted in the accompanying REPORT, m&a activity has been strong in this sector, driven by at least four factors: 

  • A rapidly evolving global environment in which a host of uncoordinated regulations such as Basel III, MiFiD, PSD2, GDPR, Dodd-Frank and other privacy laws, anti-bribery and corruption enforcement rules are expanding across most of the developed world
  • A need for RegTech tools that will operate across the enterprise in coordination with other systems
  • The enormous potential cost of failure to comply with regulations or to prevent increasingly sophisticated threat agents from stealing or misusing a firm’s systems and data
  • Technology – including AI, that can help firms do more

The result is that annual Enterprise RegTech software spending is now estimated to be more than $6B and growing at ~15% per annum. 60% of respondents to a recent (pre-COVID-19) Thomson-Reuters survey expected their budgets to increase for the coming year, while over a third expected their compliance teams to grow. COVID may slow some of this uptake, but it can’t stop it. 

As noted in our REPORT, while COVID had a near-term impact, m&a values and trends continue to rise in this sector. We expect it to continue. A few recent transactions include:

  • The acquisition of Emailage, a provider of fraud prevention and risk management functions, by LexisNexis Risk Solutions (part of RELX)
  • $80mm in growth capital raised by Fenergo from ABN AMRO Ventures and DXC Technology
  • FeatureSpace raised £30mln from Merian Chrysalis Investments

Kind regards,

Max

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