It’s official—after a few weeks of speculation, SS&C Technologies has announced that it is acquiring Eze Software from TPG Capital, further consolidating the order and execution management system (OEMS) space. The deal, which is expected to close in the fourth quarter of 2018, is valued at $1.45 billion—or about or about 10.8x pro forma Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)—with SS&C funding the merger through a combination of cash and short-term loan debt.

According to the companies involved, Eze Software had total revenues of $280 million and EBITDA of $105 million, while SS&C expects $30 million of run-rate costs savings, achieved by 2021.

This deal comes on the heels of State Street’s announcement on July 20 that it will buy Charles River Development (CRD) for $2.6 billion. Industry sources described that price tag as “outlandish,” “unbelievable,” and that the deal was “probably double” of what one source thought CRD would go for. Conversely, this deal was more in range of industry expectations, with one M&A specialist saying that the price “seems about right,” but noting that it’s a “different kind of buyer” than that of State Street, and a user of Eze Software’s Eze OMS saying that SS&C did well: the price is “less than what I thought TPG would take after owning Eze for five years, [but it’s] hard to say what kind of cash they have used to pay down debt, et cetera the past few years.”

[For more on the State Street-Charles River deal, and the shrinking OMS space, click here.]

The (Not So) Long and Winding Road

The path to this point has been a winding one for Eze Software. The vendor was created when Eze Castle Software, the order management system provider, and RealTick, a multi-broker, cross-asset electronic execution platform, were spun out of agency broker ConvergEx and acquired by TPG Capital at the beginning of 2013, merging them with the Tradar portfolio management system. The resulting company that housed the combined platforms became Eze Software, which, even five years later, is still often referred to as Eze Castle in shorthand by industry veterans—not to be confused with Eze Castle Integration, another buy-side vendor, also named for the same village on the French Riviera.

Eze Software, which is headquartered in Boston, is a buy-side specialist and counts asset managers and hedge funds of all sizes as clients. It has done very well with long/short equity shops, according to sources, even though it also supports credit, fixed income, and various other instruments. A source at a hedge fund that recently switched to Eze from Charles River says that “they beat Charles River and Advent Moxy and Bloomberg, in particular, with service, so smaller and mid-sized folks like them because they’re a good partner.”

In an article published by WatersTechnology last week detailing the State Street-Charles River deal, and changes in the wider OMS space as a whole, sources said that it would make sense for TPG to look to cash in on its 2013 investment, and that it would make sense for another technology company to lead the charge, rather than TPG selling off to a different private equity firm.

In mid-July, StreetInsider.com first reported that SS&C was going to buy Eze, though both vendors remained silent. Speculating about a merger between the two, sources told WatersTechnology that Eze was a tasty M&A target because the bulk of its revenue comes from executions on the FIX network, rather than through software licenses, which is unusual in the OEMS space. One source put the breakdown at about 65 to 75 percent revenue through executions, with roughly 25 to 35 percent coming from software licenses.

“When we looked at Eze Software internally and we looked at the cost, we were like, ‘Wow, why is that so much cheaper than other OMSs that we’ve had in the past?’ Then you realize that yes you pay them a license, but they get paid through these executions,” says a hedge fund CIO.

A senior executive at a trading venue said that “everybody is trying to bulk up and be the large fintech player,” so further acquisitions are likely, adding that a deal for Eze would “be part of [SS&C’s] MO as they continue to buy and acquire other opportunities to continue their growth path. That’s how they’ve grown. …I think SS&C has a really good multiple that they can leverage.”

SS&C and Eze Software could not make executives available for an interview in time for publication. 

The Ever-Expanding Empire

In the world of fintech, perhaps no firm has been as aggressive in the M&A space as SS&C Technologies (see chart), which has completed over 50 acquisitions since it came into existence in 1986. In January, SS&C acquired DST Systems, a provider of technology, advisory and business operations outsourcing to the financial services and healthcare industries, for $5.4 billion. Four years earlier, SS&C bought DST Global Solutions, a subsidiary of DST Systems, for $95 million. It also can’t be overlooked that Windsor, Connecticut-based tech giant bought Advent Software—which includes Moxy—in 2015 for $2.7 billion. And, outside of technology, SS&C has become the world’s largest fund administrator through acquisition. 

The deal for DST Systems closed in April, but SS&C was far from done with its expansion plans for 2018. In February of this year, it was announced that Temenos was set to acquire Fidessa for £1.4 billion ($2 billion), but that bid fell through after shareholders rejected the deal because of separate counter offers from SS&C and from Ion Investment Group. In late April, it was Ion winning out with a bid of £1.5 billion.

In a call with shareholders on May 2, Bill Stone praised Fidessa’s technology but said that “the price was nose-bleed level”. Even so, he said that because the company had already raised money for a potential Fidessa deal, he anticipated another deal to be fairly imminent.

“We raised a little extra cash and we have about $750 to $800 million in cash on our balance sheet. There are a number of properties that are in the marketplace, or coming to the marketplace, that we have some reasonable interest in, and those would range from probably a cost of $1 billion to $3 billion,” Stone said. “I think with the cash on hand and we obviously still have some dry powder in our debt facilities, we’d be able to accomplish those without much strain on us.”

Enter, Eze Software. Now the question is: Who’s next?