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Strategic Intelligence for the Securities & Investment Industry

January 23, 2006

Strategic Intelligence for the Securities & Investment Industry  

January 23, 2006

States of New Unions

The New York Stock Exchange’s historic merger with Archipelago Holdings, Inc. may have made big headlines, but the recent spate of mergers and acquisitions activity engulfing information and technology companies also merits interest and attention.

Witness some of the recent deals: ITG Inc.’s acquisition of Macgregor and Plexus Group; Lehman Brothers’ purchase of Townsend Analytics; Sweden’s Orc Software’s plans to buy Cameron Systems of Australia; FactSet Research Systems’ purchase of Derivative Solutions; Thomson Corporation’s purchase of Global Securities Information, Inc.; SS&C’s takeover of Financial Models Company of Toronto, followed by Carlyle Group’s purchase of SS&C; the private equity buyout of SunGard; and Linedata’s acquisition of Beauchamp Financial Technology Ltd. of London and Global Investment Systems, to name but a few.

“The technology world is in the midst of a significant consolidation,” says Kenneth B. Marlin, principal and founder of Marlin & Associates, a specialized investment banking advisory and consulting firm providing transaction advice and services to middlemarket firms. “Oracle acquired 13 companies alone in 2005, including the $5.8 billion purchase of Siebel Systems and its $10.3 billion acquisition of PeopleSoft in January. We believe that Oracle will continue to be an active acquirer. So will SAP and IBM.”

Indeed, 2005 has been the best mergers and acquisition market that anyone has seen probably since 2000, says Marlin, who expects to see continued strength in 2006. According to Thomson Financial which tracks tracks merger activity broadly, there were $2.7 trillion worth of mergers and acquisitions in 2005 worldwide, of which $1.13 trillion were deals announced by US firms.

Fortunes of financial technology firms are very much tied to the health of the financial services industry. When Nasdaq crashed in March 2000, shortly thereafter, many companies serving the securities and investment industry themselves had problems, because revenues went down, as did their profits. “Essentially, you had two different dynamics going on in the post-2000 world which continued through 9/11 and beyond,” says Marlin. “One was that the financial performance of these companies suffered because their customers weren’t buying. The second thing that happened is that the M&A market dried up because the likely buyers stopped buying. So, from a supply and demand viewpoint, the demand went away.”

The pick up in mergers and acquisitions activity clearly signals that more buyers are convinced the business turnaround is not ephemeral. That augurs well for the year ahead, but more on that and other business drivers in upcoming issues.

Sincerely,

Pavan Sahgal
Editor in Chief

Excerpted with permission from Global Investment Technology, Copyright © 2006 by Investment Media,
Inc. All rights reserved. 820 Second Avenue, 4th Floor, New York, NY 10017. Tel: 212•370•3700.

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