is buying businesses to generate business by acquiring Boston Institutional Group
(BIG), a service provider for mutual fund complexes, for $35 million. The deal moves approximately thirty clients and annual revenues of $25 million over to BISYS, in addition to the opportunity to cross-sell BISYS products to the newly-fattened client list, and vice versa.
BIG has been shopping itself around for the past 5 months, after determining that they lacked the money and infrastructure to fulfill the strategic goal of a European expansion without a larger partner. As reported in the MutualFundWire, BISYS recently added a European-focused executive to help expand offshore business.
"The European market is just starting to open up to financial intermediaries, and there's going to be a need to sell business expertise," said Betsy Connolly
, chief executive officer of BIG subsidiary Funds Distributor (FDI), and a team leader in the merger process. "The capital we needed for the next step was difficult [to acquire]."
Both sides cite the cross-selling opportunity as a major reason, as the zero overlap in client lists and product lineups present untapped, lucrative opportunities.
"You can generate a lot of revenue from a large deal with one of their clients," said Dennis Sheehan
, the chief financial officer at BISYS. "One major agreement, and the merger pays for itself."
The merger is expected to strengthen both companies' positions within the competitive picture, especially as consolidation continues in the fund business. "The service business is looking to maximize the service list they have against the service list of the client base," said Connolly. "The market is a lot more challenged when you're competing [without a complete array.]"
The companies have not yet reconciled staffing issues. Contingent on the business opportunities that may or may not appear, Connolly left open the possibility of expanding the number of employees, but she cautioned that FDI was "not looking to restructure in any kind of material way." Sheehan, however, confirmed that some downsizing was inevitable, though the extent was undecided.
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