After an eight-month process, BISYS Group
BISYS provides a variety of outsourcing services to the financial-services industry, including fund accounting, administrative services, and distribution. But over the past year, BISYS has suffered some major setbacks. It paid the SEC $21.4 million to settle charges related to dubious marketing practices of mutual funds, and CEO Russell Fradin also departed.
J.C. Flowers will get BISYS' retirement and insurance divisions, while Citigroup will keep its Fund Services and Alternative Investments Services units, including the lucrative hedge fund business. That particular area has been a cash cow for companies such as Goldman Sachs
For a company of Citigroup's size, this deal has negligible impact -- but it's still a smart way to build a bigger footprint in the hedge-fund space, and it's a good bet we'll see similar deals in this segment. BISYS's customer base includes 1,200 hedge funds and 400 private equity firms.
BISYS's valuation comes to a fairly cheap 1.4 times revenue, although the company's growth has slowed over the past couple of years. Its revenue guidance for 2007 calls for increases in the low-to-mid-single digits, according to the company. Keep in mind that BISYS' investment banker, Bear Stearns, contacted 142 potential buyers, yet received letters of intent from only four. Alas, trigger-happy traders hoping for a higher price shouldn't expect another bid for BISYS.