NEW DELHI/ MUMBAI (TIP):
NYSE-listed global credit ratings agency, Moody’s Corp has acquired Amba Investment Services, a provider of investment research and quantitative analytics for financial institutions, for an undisclosed sum underscoring large scale strategic appetite for big data and knowledge outsourcing start-ups. Even though financial details of the deal were not disclosed, sources aware of the agreement, say the deal value is estimated to be between $80 million and $85 million (Rs 490.5 crore and Rs 521.1crore).
Upon completion, Amba’s existing venture capital backer, Helion Venture Advisors will completely exit the venture, along with its 4 original founders – all investment banking and equity research veterans from marquee institutions like Deutsche Bank, JP Morgan and Goldman Sachs – who had teamed up ten years ago. The venture fund had invested between $7 million (Rs 42.9 crore) and $10 million (Rs 61.3 crore) in Amba five years ago from its first fund – Helion – I.
Amba will now operate as part of Moody’s Analytics subsidiary, Copal Partners, a company release said. Moody’s, in 2011, had picked up a majority stake in Copal. According to a statement released by Moody’s the deal, which is not expected to have a material impact on credit rating agency’s earnings per share, was funded from cash on hand. Amba expects to generate nearly $39 million (Rs 239.1 crore) of revenue in 2013. “Amba is highly regarded for its offerings to investment research firms and asset managers, and Copal is known for its strong services for corporate finance.
Together, their scale, talent and resources offer global financial institutions a broader array of research and analytics,” said Mark Almeida, president, Moody’s Analytics. It was reported in August last year that Helion Venture Partners, India’s largest domestic venture capital firm with assets under management of $605 million (Rs 3,709.3 crore), was in talks to sell its stake in Amba, a potential deal which could also see the Bangalore and New York-based start-up’s founders exit the venture. Avendus Capital acted as the advisor for Amba Research.
In the past, companies like Genpact pursued this buyout, but the initial valuation expectation of over $110 million (Rs 674.4 crore) turned out to be a deal breaker. Moody’s have been in exclusive negotiations with the Amba management for months. Founded in 2003 by four Wall Street veterans, Amba Research is today has emerged to be amongst the leading financial research and analytics outsourcing firms working with leading investment banks, hedge funds and asset management companies. Starting with a team of 10 in Sri Lanka, Amba currently employs over 900 employees. Its delivery centres are in Bangalore, Colombo San Jose, Costa Rica with sales offices in New York, London and Singapore.
Fully benefiting from the founders’ own background, Amba’s service offering in its formative years was equity research support. Over the years, striving to widen its competitive edge, Amba has expanded its service offerings to include fixed income and credit research, quantitative research, sales and marketing, corporate finance, research production, compliance, and commercial lending support. Amba’s client base of 80-plus global clients includes seven of the top 15 global investment banks. Further, over 35 asset management firms, managing over $8.5 trillion, use their services.
Over the last two to three years, the company has added corporate banks to its clientele, covering both investment banking and commercial banking support services. Analysts tracking the space say, the knowledge process outsourcing space is increasingly witnessing a bigger consolidation. After a string of deals in business process outsourcing, the KPO industry is now seeing some of the early founder-promoters exit. Unlike business process outsourcing, which relies more on scale, KPO is a more niche, focused play and attracts buyers in operating the same segment or bigger outsourcing players, which want to expand to acquire capability in that niche space.
According to Nasscom-Crisil study, KPO sector is expected to grow at CAGR of 22% and reach $5.6 billion in revenues in 2015, with financial services being the largest contributor. In December last year, US consumer credit reporting agency, Equifax, acquired a majority stake in Bangalore-based data analytics and business intelligence firm Nettpositive for an undisclosed sum.
Nettpositive also provides analytics and business intelligence solutions to the financial services, insurance, retail and telecommunications sectors. Separately, global private equity firm TA Associates shelled out $25 million (Rs 153.3 crore) to acquire a significant minority stake in advanced analytics company Fractal Analytics, earlier this year.
Way back in 2004, Crisil had acquired iRevna while in 2011, following Moody’s, it again bought Coalition. Investment bankers specialising in such transactions said, typically deals take place at 2.5 to 3 times sales.