Fidessa has agreed to terms of an all cash acquisition by Temenos just a day after both firms confirmed they were in discussion over a £1.4 billion deal.
Shareholders at Fidessa will receive £35.67 in cash per share, 37% higher than the closing price on 16 February prior to the announcement, alongside the right to final and special dividends.
Temenos said in a statement issued today that the acquisition represents a “compelling opportunity to create a global leader in financial services software”.
“The current vendor landscape is fragmented and dominated by legacy technology,” said Andreas Andreades, executive chairman at Temenos.
“This creates a huge opportunity to combine the complementary product strengths of Fidessa and Temenos in the front and back office to create a highly differentiated multi-asset class end-to-end platform for capital markets that will offer best in class costs and processing capabilities.”
Speaking to The TRADE, analyst at Liberum, Justin Bates, explained the transaction reflects the attractions of high levels of recurring revenues, seen at Fidessa, and brings about the opportunity for meaningful cost synergies.
The deal is expected to yield significant benefits for Temenos through cross-selling opportunities, with roughly $60 million of cost synergies targeted within three years of the deal completing.
“More importantly, it starkly illustrates the strong desire to secure desk real estate/own the plumbing of the global financial system,” Bates added. “Ultimately, if you own the pipes you control the pricing. We fully expect to see further consolidation in this sector and view NEX Group as a prime take-out candidate.”
Furthermore, Temenos stated large banks are increasingly outsourcing internally developed systems to third-party software providers to reduce costs, but the current vendor landscape is fragmented and dominated by legacy systems.
“This creates a significant market opportunity… to create a modern multi-asset class front to back solution addressing banks' needs for the flexibility to adapt to changing market and customer demands with the highest levels of automation to reduce costs and speed up execution,” the statement explained.
The combined group will provide Temenos with greater access to tier one and tier two financial institutions, particularly through Fidessa’s relationships with firms in the US and Japan.
“We are convinced that our combined company will have a unique set of capabilities that when combined with our exceptional people will position us as a core strategic partner to large financial institutions globally looking to upgrade their systems for the digital age,” Andreades concluded.