By Ted Howard and Joseph Neu
Acquisition expands functionality for the company as well as for the treasury management system vendor universe.
Reval’s sees its January acquisition of Austria-based treasury management system (TMS) vendor ecofinance as not only good for its own prospects but also a boon for those companies looking for more choice.
“Frankly if there were still 20 TMS providers in the US we wouldn’t have gone down this path because there would be a lot of competition and a lot of choices,” said Jiro Okochi, Reval’s founder and president. But with all the consolidation in the US over the past few years (most recently Wall Street System’s acquisition of Thomson Reuters’ Treasura; see “Wallstreet’s Treasura Buy Completes Mid-Market Plan” on iTreasurer.com), there weren’t many vendors from which to chose. “If I were a US corporate I would have been concerned about the lack of choice,” Mr. Okochi said.
Mr. Okochi said Reval’s acquisition now positions it as one of only three Fortune 1000 players in the US market. “We didn’t take a TMS vendor out of anyone’s market place,” he added, noting that not only has Reval added a TMS provider in the US but it’s also added more robust features for ecofinance’s German clients.
Finding the right partner
In acquiring a TMS vendor, Reval likely is looking to get ahead of a market that is rapidly moving toward more integrated treasury IT solutions. But putting that functionality diversification aside it may also be seen as a risk-mitigation strategy for scenarios where demand for quantitative effectiveness testing declines in the face of new hedge accounting guidance. But Mr. Okochi said it was simply a matter of the market and the fact that clients “were shifting back towards a single integrated solution.” Nor has there been any decrease in the demand for its hedge-accounting services.
Given the serial acquisitions in the TMS space by SunGard and then Wall Street Systems a purchase of functionality required that Reval identify a highly capable niche provider that was still on the market. The downside of this approach is that Reval is pursuing a broadening strategy aided by a vendor almost no one outside of Central Europe has heard of. The good news is that many a successful treasury platform, including SunGard’s Quantum, has its roots in some obscure, yet capable platform that was snatched up at the right time.
So why the obscure TMS vendor in Germany? Several reasons, Mr. Okochi said. First there were few vendors in the market that fit Reval’s criteria—namely software-as-a-service (SaaS) ready. ecofinance was one of the few companies that had a product that could be truly hosted; and a single version, multi-tenant application. Beyond the tech, Reval was also looking for a company that had a good reputation with good customer rapport, both of which ecofinance had. Finally, Germany has the fifth largest economy in the world. “So it was a good opportunity for us.”
That quantum leap?
Will the ecofinance acquisition prove to be Quantum-like in its success? Possibly. As part of its due diligence, Reval arranged for several of its customers to demo the ecofinance solution, known simply as Integrated Treasury System (ITS). Afterward, those customers said it would definitely have made their RFP short list, according to Mr. Okochi.
An early test of whether Reval can successfully distribute a Germanic solution to the wider world, including the US, will come in how readily ITS’s cash and payments management functionality and related workflow automation, key platform strengths, can be tweaked for other markets and their business practices.
Reval offered no timeline for when a fully integrated product (including FXpress/FIRST) will be ready. Until then, with its newly enlarged global workforce, the company stands committed to being 100 percent client-focused on a 24/7 basis. Current customers of both Reval and ecofinance will certainly hope that this remains the case. But just as importantly, every treasurer probably wants to see another vendor step into the global TMS space, just to keep SunGard and Wallstreet honest.
“We hope they’re happy,” Mr. Okochi said about customer reaction to another vendor coming to market. But, he added, it will be “up to us” to prove that the company belongs in the TMS space.
last (ger)Man standing
Reval’s acquisition of ecofinance leaves one other small TMS vendor left on its own in the market: BELLIN Treasury.
Founder Martin Bellin said his firm has been approached by companies offering to buy it—more recently XRT Treasury Management Systems, which itself was purchased by business management software company Sage Group—but he said he’s always refused.
BELLIN, he said in an email, wasn’t founded for financial reasons, but to create a treasury concept that he felt wasn’t in the market when he was a treasurer. This concept became tm5 which is a Web-based treasury application “conceived to motivate every company unit to gather all treasury-relevant information where it can be accessed independent of place or time.” For Mr. Bellin, it’s more about philosophy and principle.
The company serves 175 companies with users in over 120 countries. Its offerings include daily cash management, payment, administration and evaluation of deals. Its products also help manage interest rate, FX and commodity risks.
“If I would sell, I would sell all my visions and ideas against my principles,” Mr. Bellin said. In his opinion, BELLIN’s offering is more “Beam me up, Scotty” vs. what’s now available in the TMS market, which he compares to the “old fashioned but common way” of transport: a car. “Why should we sell and let this idea die?” he said.
This is a concept that IT will explore at a later date.