SS&C Acquires Financial Services Subsidiary For $95M

SS&C Technology Holdings has purchased an investment management software subsidiary for $95 million, tapping into new geographies and world-class financial services clients.

The Windsor, Conn.-based solution provider, No. 41 on the CRN Solution Provider 500, acquired DST Global Solutions, a 390-employee subsidiary of Kansas City, Mo.-based DST Systems.

DST Global draws 90 percent of its revenue from outside the Americas, and its portfolio of clients includes big names such as HSBC, T. Rowe Price and UBS.

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SS&C's Chairman and CEO Bill Stone said DST Global's geographic reach caused SS&C to pursue the deal more aggressively because the company was interested in growing its presence outside North America.

The subsidiary clocked $70 million of sales in 2013, although it is on pace for just $65 million in revenue this year. But during a conference call Tuesday, Stone said that he expects DST Global to consistently deliver high single-digit revenue growth under SS&C's tutelage.

Financial services software isn't a core focus area for DST Systems, meaning SS&C should be able to teach the existing workforce tricks of the trade to go deeper with more products and services.

DST Systems reached out exclusively to SS&C about the acquisition opportunity because the company believed its clients would be best served by a firm with deep expertise in financial services.

"I think they chose a good home for them," Stone said. "We're excited about some of the technology we're picking up."

DST Global derives 80 percent of its revenue from HiPortfolio, an investment and fund accounting platform, and 15 percent from Anova, a buy-side investment data management and analytics platform. SS&C will look to freshen up the tools by infusing them with more functionality and capabilities, Stone said.

Stone hopes to push SS&C's data center, mobility, web portal, data, asset class and fixed network solutions into DST Global's base of 155 clients, many of which are well known and have deep pockets.

"We'd like to pick up as many large, strategic clients as we can," Stone said.

The subsidiary, though, also has smaller clients, and SS&C said its technology should help level the playing field and allow them to better compete against larger counterparts.

"We're going to shower them [smaller clients] with love and affection," Stone said.

DST Global has a strong presence in Australia, Stone said, and has gained a toehold in China with two of the nation's biggest life insurance companies as clients. The company has 12 office locations, including in Melbourne, Sydney, Shanghai, Hong Kong, Bangkok, London and Boston.

More than 65 percent of DST Global's revenue comes from maintenance, Stone said, while roughly 30 percent comes from professional services and licenses. The maintenance contracts normally run three to five years and are gradually moving from a perpetual to a one-time basis, he said.

Although DST Global currently has operation income margins of 15 percent, Stone said he'd like to push those even higher by focusing on services. SS&C can also boost margins by improving DST Global's core offerings because big financial services players are typically more concerned with functionality than price, he said.

Some $75 million of the all-cash deal will be funded by SS&C drawing down on a $100 million line of credit. It's the second-largest acquisition in the history of SS&C, Stone said.

Shareholders of both companies have responded well to the news since the deal was announced after markets closed Monday, with SS&C's stock rising 1 percent to $51.30 per share and DST Systems' stock going up 0.6 percent to $98.94 per share.

DST Systems, however, said in a filing with the U.S. Securities and Exchange Commission (SEC), that the sale will reduce 2015 earnings from 20 cents per share to 16 cents per share. Conversely, SS&C expects the acquisition to boost 2015 earnings.

PUBLISHED DEC. 3, 2014