No Exit (Or Very Few)


New York – After bemoaning the lack of consolidation in the research industry, we checked with our database pundits for evidence of downsizing.  From May through August, we ‘deactivated’ twelve research firms that have shut their doors, and another eight that have merged with other firms.  We are not seeing a rush to the exits.

Let’s start with the defunct firms.  Firms that go out of business don’t issue press releases as founders move on to other pursuits.   It often takes detective work on our end to determine that a firm is no more.  As we update our ResearchSelect® database of research providers, we look for firms that are no longer in business.  In some cases, the clues are straightforward as websites are removed and phones disconnected, but this is not always the case.  Our data analysts often have to track down court dissolution papers or other evidence that a firm is officially out of business.

The most notable casualty during the period was Gridstone Research, a quant firm which created bespoke models for institutional investors.  In May 2008, the San Mateo-based firm raised $10 million in a Series B round led by Helion Venture Partners of Bangalore, India, along with other previous investors Charles River Ventures of Boston and Maverick Capital Ltd. of San Francisco (the private equity group within Maverick), which brought the total investment in the company to more than $18 million.  Our databankers determined that Gridstone’s holding company dissolved in April of this year, not quite two years after the latest capital raise.  On April 15, 2010, Perputo, Inc., a Delaware Corporation doing business as Gridstone Research and its wholly owned subsidiary in India, Perputo Content Management Pvt. Ltd., ceased doing business on April 15, 2010.

We found two other failed quant firms during the last four months.  Alpha Strategies LLC, a quant research firm from West Conshohocken Pennsylvania, closed when the principals went to other pursuits., a South African quantitative research firm, suspended operations when its founder Paul van Rensburg returned to academia.

We archived three fundamental research boutiques during the period.  Sand Hill Equity Research, a Palo Alto based fundamental boutique focused on the healthcare sector, folded when the founder, Bruce Ackermann started a new company, Pacific Family Office Management.  The Bank Notes, a Long Island based fundamental research boutique focused on the financial sector, ended when its founder Steve Digilio went to work at Taylor Asset Management.  Kingside Partners LLC, a fundamental research boutique, was dissolved based on filings in Massachusetts.

Three paid-for research firms bit the dust.  Toronto based Cronus Capital Markets dissolved when its founder joined a private equity firm.  Spelman Research Associates Ltd of New York City and Brimmal Research LLC of Los Angeles also went under.

The other losses included Arthur Donner Consultants, a Canadian economic boutique, closed when its distinguished 73 year old founder retired.  Finally, Jack Lifton LLC, a mining industry consultancy dissolved when Lifton co-founded Technology Metals Research, an industry consultant focused on rare earth metals.

Then we have the mergers and acquisitions:

  • Execution Ltd, a London based agency broker acquired Noble Group Ltd in February 2010.
  • Singapore-based Springboard Research, an IT consultancy group, acquired Hydrasight, an Australian-based IT industry consultant in March 2010.
  • IHS Inc., the acquisitive parent of John S. Herold, CERA and Global Insight, acquired automotive industry consultant CSM Worldwide for $27 million in March 2010.
  • Canadian broker Canaccord Financial bought M&A boutique Genuity Capital Markets for $227 million in April 2010.
  • Three small market research firms based in London merged into one entity in April.  Buckingham Research (not to be confused with NY based fundamental shop Buckingham Research Group), Quaestor Research and Andrew Irving Associates formed Optimisa Research.
  • Weiss Group LLC bought back its ratings business from in May 2010, having originally sold the business to TheStreet in 2006.   The entity, which will again be named Weiss Ratings, provides ‘safety’ ratings on banks and insurance companies.
  • Cognolink Ltd, a London-based expert network, acquired Epito in June, 2010.
  • Also in June, ESG firm Analistas Internacionales en Sosteniblidad (AIS) merged with Netherlands-based Sustainalytics to become Sustainalytics Spain.  Swiss ESG firms Centre Info and INrate also completed their merger in June.

So what is the tally?  Twelve firms inactive (although one started a new firm) during a four-month period annualizes to thirty-six firms out of a universe of 1554 active firms, or a little over 2% attrition.  The research industry has low barriers to entry but strangely high barriers to exit, as analysts hang on to lifestyle firms and, worst case, go work for other more established firms.

Special thanks to Amy Campbell and Michelle Crise in the preparation of this article.


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