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Lombard Risk Management’s announcement that it plans to acquire the regulatory reporting business of US-based SOFGEN Holdings for $4.25m will have a multiple impact on the company – including taking it further into the important North American market where Lombard is looking to grow, and boosting its existing regulatory portfolio in time for the next round of regulatory change that is due over the next couple of years.
The purchase will be paid for through a combination of cash, loan notes and equity. The business has pro forma profits of $0.4m - $0.5m. At the half way mark in the financial year (September 31, 2011) Lombard Risk Management was reporting a pre tax profit of £1.3m on revenue of £6.4m (see Lombard Risk wins on risk management).
While adding to the financial base, SOFGEN is a strategic purchase for Lombard, increasing its critical mass and making it one of the larger players in the regulatory space – it says it will be the leading provider of regulatory reporting to foreign banks in the US and the third largest provider (by assets reported on) of regulatory reporting to domestic banks in the US, and with a bigger presence than all of its international competitors combined.
The acquisition is highly complementary and has the hallmarks of being positive for the business. It is another indication of the level of change that the company has undergone since early 2010 when there were major board changes (see Lombard changing of the guard), and a demonstration of its commitment to grow profitably (see Lombard growing but so are losses).
