FTF News got time with Bill Stone, founder, chairman and CEO of SS&C Technologies to gather his insights on SS&C’s key acquisitions last year.
(For the securities operations industry, last year saw many key mergers and acquisitions in several sectors: financial services firms, financial technology vendors, service providers and even between firms and vendors. A major provider to the securities industry, SS&C Technologies had its share of acquisitions, adding DST Systems, Eze Software, CACEIS North America and Intralinks to its arsenal. During SS&C’s Deliver conference, Sept. 12-14, last year at Wynn Las Vegas, FTF News got time with William (Bill) C. Stone, founder, chairman and CEO of SS&C Technologies to review this phenomenon. Stone gave us his views on the overall M&A activity and insights on SS&C’s key acquisitions.)
Q: How do you think the M&A activity among your clients in 2018 will impact SS&C’s offerings and your strategies? There was also a trend where financial services firms were buying vendors.
A: Well, it depends what you’re really talking about.
If you’re talking about a large-scale life insurance company buying another one, or a large-scale asset manager buys another asset manager and one of them did equities and the other one does fixed income, well then some of the technology and services they’re going to need are going to be different.
If you take clients that are basically the same, then it’s just a question of being able to make sure our offerings can scale to the size of whatever came together because their strategies might be the same and they might use the same kind of assets in the same way. So, it’s a lot different.
If you take something like State Street buying Charles River Development, then now you’re talking about a financial services company that acquires a technology firm.
I think you have to look more at who State Street really competes against — and you really have SPDRs competing against iShares. BlackRock is the 6,000-pound gorilla in this process and State Street, I mean not that they’ve told me this, but I think it would need Charles River as a direct competitor to Aladdin.
Q: So, it’s a strategic move for them. Although some people did say that the dynamic of a financial services firm versus the dynamic of a vendor, that those two dynamics are very different.
A: Well, I think that almost all financial services firms are vendors. It’s just a question of what is the product or service that they’re vending. So, increasingly it’s blurred.
Is Aladdin a vendor? I mean is BlackRock a vendor because they sell Aladdin? Or is BlackRock a customer because they buy technology and services from us, and from a bunch of other people?
So, it’s not as sharply defined I think as you might think.
Q: Could we drill down a little bit on SS&C’s acquisitions in 2018?
CACEIS North America:
Well, CACEIS North America is the hedge fund administration arm of a big French bank, so it’s right in our wheelhouse [the business unit was part of the Paris-based asset servicing group of Crédit Agricole ] … So, we did our analysis and bought that.
It was quite a bit less money than these other ones, we acquired it for $19.7 million. So, relative to the $8.5 billion we spent on DST and Eze and Intralinks, it’s really one month’s debt payment. We got some good people. They’re up in Toronto. It broadens out our Canadian fund administration business and it’s a good business.
For DST, we spent $5.4 billion and we got 14,400 employees and 2,100 contractors and we got half of downtown Kansas City. So, that was a lot bigger. … It’s been really rewarding to work with a lot of really top-flight people from there.
At the same time, we were trying to have people recognize that we want to go faster. So, we granted a lot of options to a lot of their employees and we broadened the bonus pool … We’re trying to create a sense of ownership, so that the people feel empowered to provide best-in-class customer service that makes a difference and helps our customers successfully reach their business goals.
People have to have a sense of community, a sense of caring, a sense of obligation and then the organization as a whole has to have the same feeling toward them. You can’t ask people to do more than the ordinary, if you’re not doing more than the ordinary for them.
That’s a maker of a very well-known trading system and very well known in the hedge fund space as having really top-notch technology. They had a group of really good people up in Boston, in particular. They had a good office in New York, too, and London. They have more than 2,500 customers.
We’re excited about what that does as a cross-sell and an up-sell with the 13,000 clients we have. So, you have an opportunity to have a warm introduction versus having to say: ‘Hi, this is Bill Stone and who are you?’ We now have people introducing us to those people [customers] and you get a chance to target your pitch, target your reasons in a more understanding or receptive way. So that’s pretty effective.
Every time we met with [Intralink’s executive team], we liked them better. They have a really good management team … They’ve been growing at eight percent, nine percent per year and we think they have a great opportunity to continue that and again we got them at what we think is financially a really good deal.
Again, it expands us, and they have more than 4,000 clients. Once again, we have chances to cross-sell and up-sell into that client base, and they can sell into our client base. … They’re pretty deep into the investment banks, pretty deep into the [private equity] GP [general partner], LP [limited partner] community. They’re the biggest virtual data room people.
So, these guys are in the business of securing very sensitive data and we think that’s going to be leverageable across our entire client base.