New York, NY – Last week global credit ratings firm, Moody’s Corp, acquired Bangalore and New York-based investment research and knowledge outsourcing provider Amba Research Services for an undisclosed sum. The deal reflects Moody’s strategic interest in big data and knowledge outsourcing start-ups.
Details on the Deal
Although the company refused to reveal the terms of the deal, sources say that Amba was valued between $80 million and $85 million. The firm is expected to generate approximately $39 million in revenue in 2013, putting the value of the deal at a little more than 2 times revenue.
According to a statement released by Moody’s management the deal, which is not expected to have a material impact on credit rating agency’s earnings per share, was funded from cash on hand.
Amba is expected to operate as part of Moody’s Analytics subsidiary, Copal Partners. In 2011 Moody’s purchased a majority stake in Copal.
Mark Almeida, President of Moody’s Analytics explained the rationale for the deal by saying, “Amba is highly regarded for its offerings to investment research firms and asset managers, and Copal is known for its strong services for corporate finance. Together, their scale, talent and resources offer global financial institutions a broader array of research and analytics.”
Strategic Rationale for the Deal
As made evident by Moody’s previous foray into the KPO space with its 2011 purchase of Copal, the firm sees this as a thriving business in the future.
According to a recent industry study, the KPO sector is expected to grow at CAGR of 22% and reach $5.6 billion in revenues in 2015, with financial services being the largest customer segment.
Moody’s interest in the KPO space is not surprising as a few competitors have also found this an interesting segment. In 2010 Indian credit ratings, research, and analytics provider CRISIL acquired financial services KPO provider PIPAL. This follows CRISIL’s 2005 acquisition of KPO provider Irevna.
Credit ratings agency Standard & Poor’s is playing in this space in a slightly different way – by slowly increasing its ownership in CRISIL. S&P started making its first investment in CRISIL in 1997, becoming a majority shareholder in 2005. Earlier this year S&P raised its ownership stake in CRISIL to 75%.
Background on Amba
Founded in 2003 by four senior directors of research from Goldman Sachs, Deutsche Bank and JP Morgan, the firm opened its first facility in Sri Lanka with its second office in Singapore. The company’s name is a combination of the first letter of each of the founders’ names.
Starting with 10 staff in Sri Lanka, Amba currently employs over 900 employees located in Bangalore, Colombo San Jose, Costa Rica, New York, London and Singapore.
Based on the founders’ background in equity research, Amba’s initial service offering was providing equity research support to investment banks, independent research firms and asset managers.
Over the years, Amba expanded its offerings to include fixed income and credit research, quantitative research, sales and marketing, corporate finance, research production, compliance, and commercial lending support. Amba’s client base of 80-plus global clients includes seven of the top 15 global investment banks and over 35 asset management firms, with over $8.5 trillion in assets under management.
Over the last two to three years, Amba has added corporate banks to its clientele, covering both investment banking and commercial banking support services.