Technology and consulting major IBM seems to be on an acquisition spree. On Thursday, it announced that it was acquiring Algorithmics, a Toronto-based risk management analytics software company for $ 387 million. A day before, on Wednesday, it acquired British crime and fraud analytics specialist i2 for a reported $ 500 million.
Financial institutions like banks, investment and insurance businesses use Algorithmics’ risk analytics software and consulting services to assess risk, comply with regulations and to make sound business decisions.
With the acquisition on Algorithmics, IBM is seeking to consolidate its services within the financial sector. Commenting on the decision, Rob Ashe, IBM’s general manager of business analytics said in a statement, “Today’s economic environment demands that financial institutions have more cash on hand, a better understanding of their financial standing and the ability to deliver more transparency to stakeholders. Combining Algorithmics’ expertise with IBM’s deep analytics portfolio will allow clients to take a more holistic approach to managing risk and responding to economic changes within their enterprises.”
Algorithmics’ risk analytics software and services will complement the risk compliance technologies IBM acquired from OpenPages last year to provide clients with a host of business analytics softwares solutions.
The company has an impressive clientèle of 350, which includes 25 of the top 30 banks and leading insurance businesses. HSBC, Scotia Capital, Allianz Group, Nedbank, Nomura, Societe Generale are a few of the company’s clients.
IBM is bullish on business analytics and in the past 5 years has spent a fortune, around $ 14 billion, on acquisitions in this area. This includes, $ 5 billion purchase of Cognos in 2007, statistical software developer, SPSS for $ 1.2 billion and $ 1.7 billion for data warehousing appliance maker Netezza in 2010, among others.
Fitch Ratings Agency, a part of the French holding company Fimalac, bought Algorithmics in December 2007 for $ 175 million. Then, Algorithmics had 150 customers using its Algo suite of software.
Currently, Algorithmics has 800 employees in offices spread around 23 financial centers of the world and the Algo suite of software has 24 modules which assess collateral value, determine credit risks and limits, analyze liquidity and numerous other market analytics related to credit and risk.
Reacting to the deal with IBM, Fimalac said that Algorithmics had generated $ 163.7 million in revenues in fiscal year ending September 2010 and had an operating loss of $ 10.3 million. Obviously, IBM’s valuation of $ 387 million for the company is an indication that it believes that the business can grow and earn a profit.
With more than 8000 expert consultants in business analytics and optimizations, 200 mathematicians who work on algorithms and patentable intellectual property and a network of analytics solution centers, IBM is a monolith in the field of technology. Algorithmics with its complementary products and services should blend in smoothly with IBM’s further expansion plans. IBM hopes to complete the acquisition by October of this year.