Ion’s Deal for Allegro Worries Commodity Tech Specialists

Ion Investment Group’s acquisition of Allegro Development, the last major independent provider of commodity trading and risk management (CTRM) software, is stirring up concerns among some customers, who worry it could stifle development and lead to price increases.

“This is probably bad news for the market as a whole. It feels like a step backwards,” says a systems implementation specialist in the energy sector. “Ion doesn’t seem to be making any investment into the [CTRM software] firms it already has and hasn’t revealed any sort of roadmap for what its plans are for them. I suspect Allegro’s recent move into metals won’t go any further now.”

Ion, which announced its acquisition of Allegro on April 17, already owns a number of large CTRM vendors, including Triple Point Technology and Openlink Financial, including SolArc, which Openlink bought in 2011.

The acquisition of Openlink in February 2018 was dubbed shrewd at the time by industry observers. Openlink, which itself acquired SolArc in 2011, provides CTRM capabilities via a cloud platform, as well as on-site deployed software.

That deal came on the heels of Ion’s purchases of CTRM vendors Triple Point Technology in 2013 and Aspect Enterprise Solutions in 2017.

In the meantime, private equity firm Carlyle Group paid $400 million for a minority stake in Ion in 2016. Carlyle is also a previous owner of Openlink, which it sold to Hellman & Friedman in 2011.

In a statement, Ion’s CEO, Andrea Pignataro, said the acquisition of Allegro “expands our footprint in commodities and our portfolio of enterprise solutions”.

Some see potential benefits in Ion’s acquisition of Allegro and Openlink. A technology consultant to energy companies says Openlink’s analytics for physicals “was never very good” and that its pricing library “had decayed”. Allegro’s capabilities in those areas are an improvement and the deal “completes Ion’s acquisition [of Openlink],” he says.

The head of trading at a mid-sized petroleum company also expects Ion to generate major cost savings in areas like support and administrative services by owning the four largest CTRM software firms. End-users should only start to worry if prices start to rise, he says: “Customers aren’t really bothered by who owns what as long as prices remain competitive.”

Acquisitions of CTRM vendors are a relatively common occurrence, the head of trading adds, although this latest deal is significant because Allegro was the last, large independent firm. 

Some mid-sized CTRM vendors such as Eka, Pioneer Solutions, FIS and ComFin Software, as well as smaller cloud-based companies, continue to operate independently.

But the chief information officer at a large oil and gas company says he is baffled by the Allegro acquisition, asking: “How is this a coherent strategy?”

The CIO argues the deal could not have been motivated by a desire to acquire Allegro’s customers as OpenLink has virtually the same client list. Instead, he suspects Ion’s plan is to dissect the offerings of the two companies, cherry pick the best, and combine them into a new and improved CTRM platform.

But that could be difficult to do because Allegro and Openlink work on different IT architectures, and it would probably be easier to start from scratch, he says.  

Ion did not respond to a request for comment.