Is history repeating itself?

Broadridge Financial Solutions has more to do before its $2.5 billion acquisition of Itiviti from private equity owner Nordic Capital is closed. For one, it’s still waiting on regulatory approvals. 

Currently, there are more questions than there are answers as to how exactly it will use Itiviti to move closer to its aim of bridging the gap between the front and back office. But sources agree that there are three main businesses that will be most interesting to keep an eye on: its Nyfix network connectivity solution; its Tbricks exchange derivatives trading platform; and its order and execution management system (OEMS). 

To read the tea leaves, though, I think it’s important to look to the past.

It could be that the Itiviti brand may fade into the background as Broadridge subsumes Nyfix, Tbricks and the OEMS. And—at least on the surface—it might seem that this happened with one of Broadridge’s previous acquisitions, Paladyne Systems. 

Broadridge bought the buy-side solutions provider in September 2011, and sources say they haven’t heard or seen Paladyne anywhere in the market since then. But Vijay Mayadas, president of capital markets at Broadridge, says Paladyne is still alive and well, and has been rebranded as Broadridge Asset Management Solutions, its buy-side business segment. 

Some disagree with Mayadas’ assessment—especially since the senior managers that built Paladyne are no longer with the company—but one strategy executive at a data and software solutions provider says rebranding and restructuring to fit a company into its new parent is normal in any acquisition. 

“With any major acquiring company, the parent brand is the enduring one, and that’s what acquiring companies want to have happen; they want their brands to be the one that’s growing, and not the smaller firm,” the executive says. 

There are still many unanswered questions about the deal. But a look into Itiviti’s past may yield some indications of what’s in store for the future. 

To do that, we must first look at how Itiviti started. Its beginnings can be traced back to Orc Software and Cameron Systems. Orc Software was a Swedish trading technology provider founded in 1987, and its main activity was as a market maker on the Swedish derivatives exchange. Cameron Systems was an Australian Fix technology provider, with a Java-based framework network called CameronFix. 

Orc Software bought Cameron Systems in 2006, and in 2010, rebranded the division CameronTec. 

In 2011, after the global financial crisis, Swedish private equity firm Nordic Capital made an offer to acquire Orc Group (including CameronTec). Its proposition was that everything related to securities and derivatives was merely in a cyclical trough and would eventually bounce back, says a former Itiviti employee. Nordic probably thought it could pick the asset up cheap, tidy it up, and then later—once the market became more active again, and market participants would be willing to pay a premium for a technology platform—would be able to unload it for a profit, and everyone would be happy, the source says. 

“It didn’t work out that way. There was no v-shaped recovery. In fact, recovery was quite slow. Interest in Orc wasn’t that high. I’d say that Orc has limited success in leveraging what Cameron brought into the company. Nordic probably saw things the same way, and split the group up again,” the source adds. 

So, in 2012, Nordic split the business into three separate entities: Orc, Neonet—an independent agency broker, which was later divested—and CameronTec. This allowed the three operating companies to focus on their respective specialties. 

“I guess there was perhaps a strategy formulated that if Orc wasn’t that interesting as a purchase proposition, then maybe combining it with something else could make it more compelling. With not being able to sell the business, I think Nordic switched to looking at acquisitions that might result in a 2+2=5 type of setup. There were talks with other platform vendors,” the source says. 

So, in 2015, Nordic bought Tbricks—a modular trading platform founded in 2006 by former members of the core Orc team—and incorporated it into Orc’s trading platform. 

But after three years apart, in 2016, Nordic Capital decided to combine Orc and CameronTec again, to form Itiviti. Then in 2017, Nordic bought multi-asset trading technology and infrastructure provider Ullink and merged it with Itiviti. The merger saw Ullink integrate its buy-side solutions with Itiviti’s portfolio of sell-side trading tools. Ullink brought to the merged entity its Nyfix connectivity, which it bought from the New York Stock Exchange in 2014 as NYSE dissolved its NYSE Technologies arm. 

Integration Consternation

As of April 22, 2021, Itiviti has a Glassdoor rating of 4.1, which takes into account company culture and values, diversity and inclusion, work/life balance, senior management, compensation and benefits, and career opportunities. 

According to the reviews, professionals working at Itiviti cite a supportive work environment and culture, and plenty of opportunities for professional growth. However, a common theme emerges: Itiviti doesn’t perform well at mergers, resulting in loss of talent, or termination of senior executives. 

Granted, most M&A activity and integration work takes years, depending on what the buyer plans to do with its purchase. Marcus Consolini, partner at consulting firm Quinlan & Associates, who served as head of Asia at Ullink before it merged with Itiviti, believes the integration work between Itiviti and Ullink may still be underway. 

“I bet some of that integration is still going on. You go down the layers and that’s quite intensive. But that’s what happens in an acquisition environment around technology—it’s not avoidable,” Consolini says.

Integrations aside, sources are concerned that now that Broadridge has come into the picture, Itiviti CEO Rob Mackay may move on to another venture. Mackay was appointed in March 2019, taking over from Torben Munch, who left the vendor in December 2018. Munch was appointed Orc Group CEO in 2012 and became Itiviti CEO when Orc and Cameron were combined.

A source familiar with Itiviti’s inner workings says Mackay was “very focused” on tidying up the company and making it as capital-effective as possible. This involved identifying growth opportunities and whipping the business into shape so it would be attractive to a potential  buyer.

Before Mackay joined the firm, the source says Itiviti undertook significant development work on the Tbricks platform, to make it suitable for specific regional requirements, starting with Mifid II compliance in Europe, then focusing on making it a good fit for the Asia-Pacific region. 

“Sales teams were tasked with selling that product, and the takeup was improving due to the product being better,” the source says. Once the product was viable in Asia Pacific, Itiviti’s focus moved elsewhere. According to the source, this resulted in Itiviti deciding to let go of “legacy and expensive” staff about six months ago. “They didn’t need these people anymore, so they parted with the company,” the source says. 

Learning from the past

Are these cuts red flags, or just part of how businesses grow? Will there be more cuts? What signal does that send to existing Itiviti employees? For any acquisition to be successful, sure, the technology and business integrations are crucial, but so is ample communication to current staff.  

The first question any employee in an acquired company asks is, “What happens to us now?” Broadridge has a lot of experience acquiring and integrating tech companies, though Itiviti—thanks to its front-office tools and the pipes that connect the sell side to the buy side—is a unique beast. On the bright side, here’s what one source with knowledge of Broadridge’s broader buy-side strategy had to say about the deal—and specifically, about Eric Bernstein, president of the Broadridge Asset Management Solutions unit.

“I think Bernstein is doing some interesting things in terms of which vendors he’s choosing to piece together and what he’s trying to do. He’s buying the right type of companies. There’s actually thought to it; it’s not just buying random cash flow streams,” the source said. 

We’ll simply have to see if that ends up being the case with Itiviti.