i-Deal LLC repackaged itself last month, getting a new name and an injection of new private equity from Veronis Suhler Stevenson LLC.
The new company, Ipreo LLC, will combine i-Deal with Hemscott Group Ltd, another financial services firm that specializes in financial data and investor relations. The combined firm will roughly double the size of i-Deal, bringing in a projected $100 million of annual revenue, executives said.
The courting process for this merger was a long one, said sources from both i-Deal and VSS. It started near the end of 2005, when i-Deal's original investor group gathered to decide whether they should stay involved or look to sell their shares of the private company.
"I pointed out to them that there was a lot of private equity money in the marketplace that was very interested in this kind of financial technology space," said Scott Ganeles, i-Deal's chief executive. "We had gotten a lot of proactive calls from them asking us, 'what are your investors thinking? We like this space, and we have an interest in getting to know you better.' "
Ganeles, who is now the chief executive of Ipreo, said i-Deal went out looking for cash and the attitude new investors typically bring along -- including the bent toward mergers and acquisitions, financial engineering, and an influx of funds.
VSS is the majority owner of Ipreo. Among i-Deal's original investors, Citibank and Merrill Lynch & Co. retained their stakes in the firm. Thomson Financial and Microsoft Corp., however, have sold their interest in the firm.
Thomson, a large investor in the previous incarnation of i-Deal, also helped develop the company's predecessor, Dalcomp. Officials from Thomson declined to comment on their decision not to invest in the new company, but several sources pointed out that Thomson is a direct competitor of other parts of the newly merged firm, such as Hemscott's investor relations line of business.
Ganeles called the deal "accretive," emphasizing that it would allow the new firm to continue working with its old investment banking clients, while adding services for investors and issuers. He added that the newly enlarged company would look to replicate the strength it has had in the municipal bond market -- which accounted for about half of its pre-merger annual revenue -- to other markets.
"That's a decent-sized company," Ganeles said. "It's not as large as the Titans, as they say -- the [Bloomberg LP]s and Reuters of the world -- but it's a significant company with scale and infrastructure."
The executive suite will not be shared as evenly, though, as i-Deal's former management will fill most of the top spots at Ipreo. In addition to Ganeles, former i-Deal president Kevin Marcus will be the president and chief operating officer. Allen Williams will be Ipreo's head of capital markets, a similar role to the one he played at i-Deal.
This is partly a result of the geography of Ipreo's existing business, said Nick Veronis, managing director of private equity at VSS. Hemscott was based in the United Kingdom, though much of its business growth had come in the United States.
"It would not have made sense to keep that home base with the senior staff in the U.K., because the vast majority of business was going to be done in the United States," Veronis said.
He added that there were many former Hemscott managers and executives who will have important positions at Ipreo. Ros Wilton, Hemscott's chief executive, will be chairman of the new company.
Veronis said that VSS was impressed with i-Deal's dominance in the muni market, and added that there are no plans to groom Ipreo for a public offering at this point.
"We obviously were attracted to i-Deal's municipal execution business -- their software business -- because it has this community effect, where it's widely used," Veronis said. "We like it because we think it's a real solid, steady business and there are real barriers to entry."
Still, during the long process of hammering out the merger details, VSS worried that the glut of refundings in 2005 might make for substantially low muni market volume until the next cyclical low in interest rates, Veronis said. Like many of their soon-to-be clients, VSS was relieved to see volume pick back up to record levels in the fourth quarter -- just as the merger was being finalized. (c) 2007 The Bond Buyer and SourceMedia, Inc. All rights reserved. http://www.bondbuyer.com http://www.sourcemedia.com
