UK-based IT2 Treasury Solutions recently announced it has been bought by Wall Street Systems. Whether to beef up its product offering or just buy out some of the competition remains to be seen. As of this writing, Wall Street has remained silent.
IT2 had been around in various forms for over 25 years and is currently used by treasuries in large corporations around the world and small- to mid-sized financial institutions. The company boasts more than 10,000 users and over 280 clients globally. Its acquisition by Wall Street Systems could push that company into SunGard territory. Over the last year or so Wall Street, itself acquired by ION Trading in 2011, has acquired Speranza, Treasura, CityFinancials and now, IT2.
Although there has been no word on the acquisition from Wall Street Systems, IT2’s former owner, CapMan Funds, which invested in the company in 2007, has been vocal in its intent: the investment paid off. CapMan sold 100 percent of its shares of what Chairman Tommy Valther Hansen described as a “very successful investment” with revenue CAGR of 17 percent over the investment period. Given this success, Enrico Camerinelli, a senior analyst at Aité, said the sale was “completely unexpected,” but “continues Wall Street Systems’ policy of growth by acquisition.”
It also suggests that scale is everything in the TMS market. Noting that twenty years ago the TMS market was made of numerous small private companies serving different types of users in different markets, Jiro Okochi, CEO of Reval, pointed out the trend of consolidation had died down over the last two years, so this latest acquisition, although not novel, is causing a stir.
However, asked about other trends for the TMS market and who might be next in line to expand or sell, he emphasized that each private company may have a different long-term exit strategy for shareholders, where larger providers could leverage the public markets but otherwise would have to consider a sale to financial or strategic investors. Mr. Okochi noted that not only was IT2 a competitor of Wall Street broadly, but also more directly of its eTC product that City Financials brought to Wall Street as well as the Treasura product in the US. This latest expansion will certainly help cement its place as the dominant TMS provider for mainstream corporate treasurers.
Kevin Grant, IT2’s CEO, appears to see the benefits of joining a larger company, saying that IT2’s “prospects to continue its successful operations as part of a larger group remain excellent.”
However, there is some skepticism about the future of IT2 and its ability to continue to innovate and serve current users under Wall Street. As a stand-alone, IT2 had “more opportunity to do business on its own terms; it was flexible and had a young, bright team; they were on the leading edge tech-wise,” said Mr. Camerinelli. “Now that they’re put into a bigger enterprise, future product development and its user-friendliness – those components will be lost…Freedom of development will be slowed.” The last launch, Version 8.0 (see our story here may be the last development for a while, Mr. Camerinelli said.
Mr. Okochi outlined two potential paths that can apply to any software acquisition. There is the standalone path where Wall Street could add IT2 as a fifth offering to its current four. And there is an integration strategy, where either IT2 clients will eventually be migrated to another offering, or clients from an existing Wall Street offering could be migrated to IT2’s platform. Depending on how effectively either of these strategies is carried out and how the product and services are supported will affect IT2 client satisfaction and retention. This could be part of the answer to recent rumors in the sector that Wall Street was abandoning Treasura; or at least ending support for the product. Did Treasura not live up to expectations so IT2 was brought in?
Wall Street’s plans have yet to be revealed, and Mr. Camerinelli said we should not expect much news, citing Wall Street’s 2010 acquisition of City Financials, which “fell under the company’s silence.” Bob Stark, Vice President of Strategy for Kyriba, commented that “what it decides to keep from this acquisition could impact how CFO’s and corporate treasurers do their job,” so there is good reason to keep an eye on the next steps.
Mr Okochi suggested that clients of IT2 need short-term to understand what ION Trading plans are for investing in the IT2 product and services, and long-term to see if the new owners deliver on those promises.
The announcement on Friday kicked up a lot of dust, but since the merger promises to be rather complex, current IT2 clients can probably breathe a bit before their TMS world is rearranged.