28 September 2010 – Temenos (SIX: TEMN), the market leading provider of core banking software, today announces that it has signed an agreement to acquire Odyssey Group S.A. (Odyssey), a Luxembourg-based provider of application software for the Private banking and Wealth Management (PWM) market.
The consideration, to be funded through a combination of existing cash and existing facilities, is USD81.0m (EUR62.1m), but Temenos will take on Odyssey’s existing debt obligations of approximately USD20.3m, translating into a total enterprise value of USD101.3m (EUR77.7m). Even after taking account of the acquisition, and using consensus estimates for EBITDA, the company expects to finish the year with USD130m of cash on the balance sheet and USD275m of debt, giving net debt of USD145m or USD13m excluding the convertible bond.
The consideration, to be funded through a combination of existing cash and existing facilities, is USD81.0m (EUR62.1m), but Temenos will take on Odyssey’s existing debt obligations of approximately USD20.3m, translating into a total enterprise value of USD101.3m (EUR77.7m). Even after taking account of the acquisition, and using consensus estimates for EBITDA, the company expects to finish the year with USD130m of cash on the balance sheet and USD275m of debt, giving net debt of USD145m or USD13m excluding the convertible bond.
The deal has already received sufficient irrevocable shareholder undertakings to be approved and is expected to close around the middle of October.
The PWM market is highly attractive in terms of both overall size and growth rates, yet remains highly fragmented. Like the overall banking application market, the PWM market is likely to enjoy strong growth as banks switch from in-house spending to third party licences in order to improve business responsiveness and organisational efficiency. However, the structural drivers underpinning growth in the PWM market are ever more compelling:Expanding high-margin private banking activities is highly desirable for banks attempting to rebuild their balance sheets and achieve high returns in an era of lower leverage;
Customers and regulators are both demanding more transparency and simpler products, forcing banks to revisit their business models
The traditional offshore model is coming under pressure from collective government action to tighten tax avoidance, increasing onshore competition and forcing banks to build competitive advantage through better service
As a result, the PWM software market is expected to grow more strongly than the wider banking application market: at around a 25% CAGR over the period 2010-2012. Nonetheless, while growth rates are high and the overall market opportunity for licence sales is put at around USD750m, vendor market share has been fragmented - spread across a large number of local specialists.**
With this transaction, Temenos broadens its product portfolio in this attractive software vertical, gains market share and establishes a clear PWM market leader that can service customers of all sizes globally. Customers of the enlarged group will benefit significantly from the availability of a combined product set, supported by one company and with a highly compelling roadmap. In addition, the economies of scale of the combination are likely to be significant in all areas.
Odyssey boasts two proven solutions for the PWM market and a large installed base of approximately 110 of the world’s largest financial institutions. The two products are namely Triple-A PlusTM, the market leading portfolio management solution for financial institutions specialising in private banking for high net worth and ultra high net worth individual clients, and WealthManagerTM, a Wealth Management Desktop for financial organisations serving mass affluent through to high net worth customers. Triple A PlusTM affords sophisticated modelling capabilities and comprehensive instrument coverage, while WealthManagerTM offers an integrated suite of components covering Client Management, Advice, Sales, Portfolio Management, Compliance and Client Reporting.
Complementing Odyssey’s established solutions with the award-winning T24 solution gives Temenos the strongest full front-to-back solution coverage in the PWM market - both for mass affluent and for high net worth individuals. In addition, combining the Odyssey products with the scale and geographical breadth of the Temenos R&D organisation, the business will benefit from an accelerated product roadmap together with an improvement in margins.
Through the acquisition, Temenos will be transformed into the clear market leader in application software for the PWM market. In 2010, Odyssey is expected to generate around USD75m of revenues (approximately USD36m of maintenance revenues), which alongside the Temenos private wealth business creates a PWM division with pro-forma annual revenues of around USD130m – significantly larger than any other vendor in the space, and representing 25% of total revenues; the remaining being revenues generated in the retail, universal and corporate banking spaces.***
Full details regarding the impact of the acquisition on Temenos’ consolidated financial statements will be given once the deal has closed. Nonetheless, the deal is earnings neutral for 2010, but is expected to be around 6% accretive to earnings in 2011.
Antoine Duchateau, Chairman of Odyssey, comments: “Odyssey has enjoyed solid growth and development over the last 15 years and has established itself as the global market leader in portfolio management for private banking. In this recovering economic environment, many new opportunities such as a strong demand for Wealth Management Desktops are appearing and we feel that integrating Odyssey into a larger and wider group is now the right solution to take full advantage of these opportunities and offer to our customers and to the Wealth Management market the best products and services. Temenos brings to Odyssey financial strengths, large development and service capacities, a global sales force, as well as back office wealth solutions which combined with our solutions will deliver a unique offering. Together, we can benefit from significant synergies and gain the strongest position across all segments and activities in the wealth management sector”
Andreas Andreades, Temenos CEO, adds: “The combination of Temenos’ Private Banking business and Odyssey creates a powerhouse in PWM application software – a business with the scale to out-sell and out-innovate competition and gain significant market share. The combination brings together the best-selling core banking platform with the best-selling front office applications, offering both sets of customers as well as new prospects an integrated yet best-of-breed back-to-front offering, which we believe will be a highly compelling proposition in the market.
With Temenos returning to strong organic growth in 2010 on the back of recovering core banking spending and having successfully completed the integration of the Viveo acquisition, we believe that this is the right time to extend our leadership with the acquisition of Odyssey.”
Notes
*Market consensus includes estimates from 17 brokers
**The size of the external PWM market today is a Temenos estimate based on a comprehensive review of all the PWM deals that have taken place in the last 4 years. Estimates for the total market opportunity (internal plus external spend) and growth rates are a combination of Temenos estimates and the estimates of industry analysts like Celent.
***Using estimates for total Temenos Group revenues in 2010 from 17 brokers and adding the expected USD75m contribution from Odyssey
About Odyssey Financial Technologies
Odyssey Financial Technologies is a global financial technology company specializing in front and middle-office software for the Private Banking and Wealth Management industry. Over 110 financial institutions in more than 30 countries have chosen Odyssey software products to increase their client service capabilities, reduce costs, and generate additional revenue.
Founded in Luxembourg in 1995, Odyssey has offices in the key financial centres, including New York, Singapore, Zurich, Frankfurt, Brussels, Geneva, Sydney and Tokyo. Odyssey’s operational head office is located in Lausanne, Switzerland. The development centres are located in Toronto, Lausanne, London and Glasgow. Throughout this network Odyssey employs over 400 staff and contractors.
About Triple’A PlusTM
Triple’A Plus™ is the leading Private Banking Portfolio Management System. It incorporates the best practices adopted by the leading international financial institutions that specialize in wealth management solutions for high net worth and ultra high net worth individual clients. Triple’A Plus™ unique configurability, comprehensive instrument coverage and flexible portfolio modelling capabilities efficiently support discretionary portfolio management, investment advisory and execution-only service models. Triple’A Plus™ empowers portfolio managers and relationship managers to increase assets under management, improve customer service and generate higher investment performance.
About WealthManagerTM
WealthManager™ is a comprehensive modular highly scalable Wealth Management Desktop designed to simplify and improve the daily work of professionals who manage & advise individuals’ wealth. The platform is a suite of components that can be combined flexibly to create leading business solutions for Client Management, Advice, Sales, Portfolio Management, Compliance and Client Reporting. WealthManager™ enhances all facets of the wealth management process, is highly scalable, multi-lingual, and multi-currency, and provides the technology that allows firms to increase their client service capabilities, reduce costs, and generate additional revenue.
About Temenos
Founded in 1993 and listed on the Swiss Stock Exchange (SIX: TEMN), Temenos Group AG is a global provider of banking software systems in the Retail, Corporate & Correspondent, Universal, Private, Islamic and Microfinance & Community banking markets. Headquartered in Geneva with 56 offices worldwide, Temenos serves over 1000 customers in more than 120 countries. Temenos’ software products provide advanced technology and rich functionality, incorporating best practice processes that leverage Temenos’ experience in over 600 implementations around the globe. Temenos’ advanced and automated implementation approach, provided by its strong Client Services organisation, ensures efficient and low-risk core banking platform migrations. Temenos is top of the IBS Sales League Table 2009; winner every year since its launch of the Best Core Banking Product in Banking Technology magazine’s Readers’ Choice Awards and ranks 26th in the American Banker top 100 FinTech companies. Temenos customers are proven to be more profitable than their peers: data from The Banker – top 1000 banks shows that Temenos’ customers enjoy a 54% higher return on assets, a 62% higher return on capital and a cost/income ratio that is 7.2 points lower than non-Temenos customers.
About T24 Private Wealth Management
T24 is a leading integrated front to back solution for private banks, supporting Discretionary, Advisory and Execution only business on a full multi-country, multi-language, and multi-channel basis. T24 provides an unparalleled breadth of instrument coverage, ranging from cash and equity type instruments to foreign exchange, loans, exotic options and structured products T24 Private Wealth comprises integrated Relationship Manager support with comprehensive CRM facilities, a comprehensive asset management suite, offering performance measurement and portfolio rebalancing coupled with a fast, efficient Back Office feature-set, enabling high STP and low error rates A full Internet banking channel and advanced customer reporting allows the private bank to provide the full service that todays customers require.
The PWM market is highly attractive in terms of both overall size and growth rates, yet remains highly fragmented. Like the overall banking application market, the PWM market is likely to enjoy strong growth as banks switch from in-house spending to third party licences in order to improve business responsiveness and organisational efficiency. However, the structural drivers underpinning growth in the PWM market are ever more compelling:
As a result, the PWM software market is expected to grow more strongly than the wider banking application market: at around a 25% CAGR over the period 2010-2012. Nonetheless, while growth rates are high and the overall market opportunity for licence sales is put at around USD750m, vendor market share has been fragmented - spread across a large number of local specialists.**
With this transaction, Temenos broadens its product portfolio in this attractive software vertical, gains market share and establishes a clear PWM market leader that can service customers of all sizes globally. Customers of the enlarged group will benefit significantly from the availability of a combined product set, supported by one company and with a highly compelling roadmap. In addition, the economies of scale of the combination are likely to be significant in all areas.
Odyssey boasts two proven solutions for the PWM market and a large installed base of approximately 110 of the world’s largest financial institutions. The two products are namely Triple-A PlusTM, the market leading portfolio management solution for financial institutions specialising in private banking for high net worth and ultra high net worth individual clients, and WealthManagerTM, a Wealth Management Desktop for financial organisations serving mass affluent through to high net worth customers. Triple A PlusTM affords sophisticated modelling capabilities and comprehensive instrument coverage, while WealthManagerTM offers an integrated suite of components covering Client Management, Advice, Sales, Portfolio Management, Compliance and Client Reporting.
Complementing Odyssey’s established solutions with the award-winning T24 solution gives Temenos the strongest full front-to-back solution coverage in the PWM market - both for mass affluent and for high net worth individuals. In addition, combining the Odyssey products with the scale and geographical breadth of the Temenos R&D organisation, the business will benefit from an accelerated product roadmap together with an improvement in margins.
Through the acquisition, Temenos will be transformed into the clear market leader in application software for the PWM market. In 2010, Odyssey is expected to generate around USD75m of revenues (approximately USD36m of maintenance revenues), which alongside the Temenos private wealth business creates a PWM division with pro-forma annual revenues of around USD130m – significantly larger than any other vendor in the space, and representing 25% of total revenues; the remaining being revenues generated in the retail, universal and corporate banking spaces.***
Full details regarding the impact of the acquisition on Temenos’ consolidated financial statements will be given once the deal has closed. Nonetheless, the deal is earnings neutral for 2010, but is expected to be around 6% accretive to earnings in 2011.
Antoine Duchateau, Chairman of Odyssey, comments: “Odyssey has enjoyed solid growth and development over the last 15 years and has established itself as the global market leader in portfolio management for private banking. In this recovering economic environment, many new opportunities such as a strong demand for Wealth Management Desktops are appearing and we feel that integrating Odyssey into a larger and wider group is now the right solution to take full advantage of these opportunities and offer to our customers and to the Wealth Management market the best products and services. Temenos brings to Odyssey financial strengths, large development and service capacities, a global sales force, as well as back office wealth solutions which combined with our solutions will deliver a unique offering. Together, we can benefit from significant synergies and gain the strongest position across all segments and activities in the wealth management sector”
Andreas Andreades, Temenos CEO, adds: “The combination of Temenos’ Private Banking business and Odyssey creates a powerhouse in PWM application software – a business with the scale to out-sell and out-innovate competition and gain significant market share. The combination brings together the best-selling core banking platform with the best-selling front office applications, offering both sets of customers as well as new prospects an integrated yet best-of-breed back-to-front offering, which we believe will be a highly compelling proposition in the market.
With Temenos returning to strong organic growth in 2010 on the back of recovering core banking spending and having successfully completed the integration of the Viveo acquisition, we believe that this is the right time to extend our leadership with the acquisition of Odyssey.”
Notes
*Market consensus includes estimates from 17 brokers
**The size of the external PWM market today is a Temenos estimate based on a comprehensive review of all the PWM deals that have taken place in the last 4 years. Estimates for the total market opportunity (internal plus external spend) and growth rates are a combination of Temenos estimates and the estimates of industry analysts like Celent.
***Using estimates for total Temenos Group revenues in 2010 from 17 brokers and adding the expected USD75m contribution from Odyssey
About Odyssey Financial Technologies
Odyssey Financial Technologies is a global financial technology company specializing in front and middle-office software for the Private Banking and Wealth Management industry. Over 110 financial institutions in more than 30 countries have chosen Odyssey software products to increase their client service capabilities, reduce costs, and generate additional revenue.
Founded in Luxembourg in 1995, Odyssey has offices in the key financial centres, including New York, Singapore, Zurich, Frankfurt, Brussels, Geneva, Sydney and Tokyo. Odyssey’s operational head office is located in Lausanne, Switzerland. The development centres are located in Toronto, Lausanne, London and Glasgow. Throughout this network Odyssey employs over 400 staff and contractors.
About Triple’A PlusTM
Triple’A Plus™ is the leading Private Banking Portfolio Management System. It incorporates the best practices adopted by the leading international financial institutions that specialize in wealth management solutions for high net worth and ultra high net worth individual clients. Triple’A Plus™ unique configurability, comprehensive instrument coverage and flexible portfolio modelling capabilities efficiently support discretionary portfolio management, investment advisory and execution-only service models. Triple’A Plus™ empowers portfolio managers and relationship managers to increase assets under management, improve customer service and generate higher investment performance.
About WealthManagerTM
WealthManager™ is a comprehensive modular highly scalable Wealth Management Desktop designed to simplify and improve the daily work of professionals who manage & advise individuals’ wealth. The platform is a suite of components that can be combined flexibly to create leading business solutions for Client Management, Advice, Sales, Portfolio Management, Compliance and Client Reporting. WealthManager™ enhances all facets of the wealth management process, is highly scalable, multi-lingual, and multi-currency, and provides the technology that allows firms to increase their client service capabilities, reduce costs, and generate additional revenue.
About Temenos
Founded in 1993 and listed on the Swiss Stock Exchange (SIX: TEMN), Temenos Group AG is a global provider of banking software systems in the Retail, Corporate & Correspondent, Universal, Private, Islamic and Microfinance & Community banking markets. Headquartered in Geneva with 56 offices worldwide, Temenos serves over 1000 customers in more than 120 countries. Temenos’ software products provide advanced technology and rich functionality, incorporating best practice processes that leverage Temenos’ experience in over 600 implementations around the globe. Temenos’ advanced and automated implementation approach, provided by its strong Client Services organisation, ensures efficient and low-risk core banking platform migrations. Temenos is top of the IBS Sales League Table 2009; winner every year since its launch of the Best Core Banking Product in Banking Technology magazine’s Readers’ Choice Awards and ranks 26th in the American Banker top 100 FinTech companies. Temenos customers are proven to be more profitable than their peers: data from The Banker – top 1000 banks shows that Temenos’ customers enjoy a 54% higher return on assets, a 62% higher return on capital and a cost/income ratio that is 7.2 points lower than non-Temenos customers.
About T24 Private Wealth Management
T24 is a leading integrated front to back solution for private banks, supporting Discretionary, Advisory and Execution only business on a full multi-country, multi-language, and multi-channel basis. T24 provides an unparalleled breadth of instrument coverage, ranging from cash and equity type instruments to foreign exchange, loans, exotic options and structured products T24 Private Wealth comprises integrated Relationship Manager support with comprehensive CRM facilities, a comprehensive asset management suite, offering performance measurement and portfolio rebalancing coupled with a fast, efficient Back Office feature-set, enabling high STP and low error rates A full Internet banking channel and advanced customer reporting allows the private bank to provide the full service that todays customers require.