BARRA Inc., a Berkley, Calif.-based provider of analytical models, software, consulting, and money management, has signed a definitive agreement to purchase Global Advanced Technology Corp., a smaller fixed- income and technology firm in New York City.
The purchase - which represents the second major expansion effort the company has made since going public in 1991 - will be for approximately 470,000 shares of BARRA stock, plus up to $3.2 million in cash, BARRA reported.
Sources close to the matter said they expect the deal to be inked by the end of the week.
When the purchase is complete, GAT and BARRA's fixed-income businesses will service more than 450 banks, brokers, investment advisers, insurance companies, and money managers, and have a combined revenue base of approximately $15 million, according to BARRA.
GAT and its products will become part of the BARRA worldwide brand name.
Tom Ho, GAT's president and co-founder, will become an executive vice president of BARRA and will focus on consulting and new business development. Meanwhile, Mark Wainger, also a co-founder of GAT, will be named technical director of fixed-income products.
BARRA will consolidate its New York fixed-income staff and operations into GAT's office in lower Manhattan.
Although he did not say all of GAT's 70 employees would be retained, BARRA marketing manager Paul Green said downsizing is not a part of the company's strategy.
"No layoffs are anticipated," he said
Founded in 1987, GAT has been developing technology to meet the needs of fixed-income portfolio managers. However, the bulk of the company's efforts have been in corporate, government, and other nonmunicipal fixed- income securities.
"Historically, we've really focused on the taxable side here," said Sean Corridon, co-director of client services at GAT.
But BARRA's acquisition of the company comes just as GAT is in the final stages of developing a product that can be used by municipal portfolio managers.
"We're in the process of rolling it out now," Corridon said.
Currently doing Beta testing, the company expects to release its "Decision" software in the fall.
The program is designed to allow users to run analytics on both municipal and taxable corporate bonds and do price-yield calculations, according to Corridon.
As the combined unit moves ahead after the acquisition, it will sharpen its focus on the tax-exempt side of the fixed-income market to keep pace with a growing demand for municipal analytics, Green said.
"We are in discussions with vendors about getting the appropriate municipal bond data so that we can model the risk of that market," he said.
Like GAT, BARRA had until recently concentrated on the taxable side of the fixed-income market. However, as technology advances and portfolio managers change the way they monitor their credits, the firm has been stepping up its efforts in tax-exempts.
"Traditionally, it has not been a focus of our efforts because it's not of much interest to institutional managers," Green said. "But now that more of these private banks and high-net-worth managers are using advanced analytics, they're beginning to demand risk models for munis. And we are developing that now."
BARRA has been expanding its presence in the financial services industry since it went public with its stock in 1991.
Last summer, BARRA bought out Casey & Associates, a Connecticut-based investment consulting firm that is now a wholly owned subsidiary.
In its most recent earnings release, BARRA reported that its net income for the third quarter of this year had risen 91% to $4,626,885 from $2,421,174 during the same period last year. That growth reflected the company's performance after the Casey & Associates buyout.
At the close of trading Monday, BARRA's stock - which is listed on NASDAQ - was valued at $32#1/8 per share.
