SS&C pays a premium for Advent

Contact: Scott Denne

SS&C Technologies scoops up Advent Software in one of the highest multiples we’ve seen among software vendors serving the investment and finance community. At $2.5bn, SS&C values the target at 6.8x trailing revenue.

The valuation is predicated on cross-selling Advent’s portfolio management software and services alongside SS&C’s broader offering of fund administration and related software, then using the accelerated revenue to pay down the combined company’s new debt. SS&C is funding the deal with $3bn in new debt and refinancing. Few businesses switch out their portfolio management systems and given that those products generate about 70% of Advent’s revenue, cross-selling could be a tricky proposition.

The combined company, however, will be well-positioned to win sales among new firms and new lines of business at existing ones. For example, SS&C has a hedge fund administration business (one it obtained in 2012 with the $895m purchase of GlobeOp) and Advent also has portfolio management for that same audience. As stock markets rise, so too will new hedge funds.

While the transaction is the highest multiple in this sector in nearly a decade, according to The 451 M&A KnowledgeBase, it’s not without precedent. Carlyle Group paid 8.2x TTM revenue when it took SS&C private in 2005 for $982m. And SS&C itself is trading today at 6.8x, benefiting from a 10% bump in its share price on news of the deal.

Following the close, SS&C will have a 5.3x debt-to-EBITDA ratio. The acquirer has leveraged up before to get a transaction done. Following its own take-private, it was at 6.8x and after its pickups of GlobeOp and Thomson Reuters’ PORTIA business in 2012 it was up to 4.2x, which today stands at 1.4x. Judging by the increase in share prices, Wall Street is confident it can de-lever again.

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