ION's Openlink Acquisition Shows Deeper Strategic Moves at Work

Openlink offers trading and risk management solutions through its Openlink Cloud platform, delivering advanced risk and market data analytics. Its main areas of focus are in commodities and energy, treasury management, and the derivatives space.

Openlink spokesperson Sehra Eusufzai says that after the close of the acquisition, they expect to be able to offer greater coverage and services for users as a result of the deal. “Because Openlink’s offerings complement ION’s existing portfolio, there are possibilities to deliver even more value to each account in the future,” Eusufzai says.

The move is the latest in a long line of acquisitions that could see further M&A for derivatives-focused vendors and, to a lesser extent, for energy/commodities trading risk management (E/CTRM) platform providers, though there might be something of a freeze coming in treasuries. 

Expanding Empire

Hugh Stewart, an industry analyst with over 40 years of experience, says that this deal is not only a positive for ION, but also for The Carlyle Group, which holds a significant minority investment in ION and has, itself, been active in the acquisition space.

“This is a very clever, thoughtful deal with a revealing historical background. Carlyle is using and encouraging ION as an aggregation vehicle and the acquisitions have logic,” he says. “Openlink adds depth and significant market share and presence to ION’s existing energy, commodity and derivatives businesses.”

He says that prior to the Carlyle investment, ION was an active participant in the mergers and acquisitions space for derivatives systems and operations, pointing to its purchases of Rolfe & Nolan, Patsystems and Anvil Software, and treasury management systems like Wall Street Systems (which had previously acquired City Financials and Treasura), Financial Software Systems and IT2.

After Carlyle’s involvement, which began in May 2016 with the private equity giant taking a $400 million stake in the company, ION nabbed Reval for treasury and risk management expansion; Aspect Enterprise Solutions, a cloud provider of commodity trading, operations and risk management software (which Stewart says compliments Openlink strongly); Dealogic for data and analytics, which they purchased from Carlyle and Euromoney—and which, Stewart says, could lead to more deals in the future centered around data acquisition.

Carlyle was also a previous owner of Openlink before selling the vendor to Hellman & Friedman in 2011. Stewart says that the Openlink and Dealogic moves show that Carlyle is rationalizing its financial, commodity and treasury tech thinking from over the last 15 years, “monetizing profit along the way,” he says. A source familiar with the setup between Carlyle and ION confirmed Stewart’s assessment of the situation, adding that ION’s founder and CEO, Andrea Pignataro, is a key partner in this strategy. 

“It’s interesting how ION can ‘join up’ the intrinsic ecosystems and food-chains that envelop—but are not yet fully digitized and formalized—in banking, asset management, corporates and commodities/energy,” he continues.

The Openlink deal also fills a whole from the past. Stewart says that ION was close to acquiring Calypso a few years ago, “which would have complemented their Rolfe & Nolan exchange-traded-derivatives ops and back-office systems with Calypso’s OTC derivatives franchise and therefore covered the new market structure footprints,” left by Basel III in Europe, and the Dodd–Frank Act in the US.

With the Openlink acquisition, it provides ION—and by extension, Carlyle—“with similar functionality in the derivatives arena, but not the market share and presence that Calypso would have provided,” Stewart says. “Openlink’s energy and commodities market share, though, is the dominant, immediate benefit that they deliver, but there are a lot of potential strategic extensions.”

Calypso moved on after the ION deal didn’t come to fruition and in April 2016 was bought by private equity firms Bridgepoint and Summit Partners. 

Treasury Slowdown?

Enrico Camerinelli, a senior analyst at consultancy Aite Group, who is currently in the process of examining the treasury management system (TMS) space, says that after a string of deals, there’s not a lot of room for further consolidation.

There’s cloud-based Kyriba; Bellin, which has started to expand beyond Germany, according to Camerinelli; and Finastra, which was born out of the June 2017 merger between Misys ad D+H Financial Technologies. And, of course, there are larger players like SAP, Oracle, Broadridge and FIS, which snapped up SunGard and its AvantGard platform in 2015.

Camerinelli believes that there’s not much room left for major mergers. He attributes this, in large part, to the fact that when it comes to treasury management systems, there isn’t the need for as many “bells and whistles” as you might see with an order or execution management system.

“Corporate treasurers, even those who work in large organizations, they’re not looking for features and functions that much; they are more looking for basic—if you will—capabilities, such as a fully-integrated view of cash positions or give the option of executing a payment and then route the payment through all the different standards and protocols that each bank has,” he says. “These are basic pillars that make the day-to-day activities of a corporate treasurer easier. These things are not rocket science, so there aren’t that many bells and whistles that you can add. Once you have those features, you can make them a little bit sexier by adding artificial intelligence or adding additional channels for payments, but not that much really makes a difference.”