April 26, 2012

24 Million Man Hours Annually = Demand for Compliance Solutions

We have been writing about the heightened activity and interest in the Compliance space for the last several months. As further evidence to support those assertions, we had two notable events announced last week. First, on the deal front, GlobalOptions announced the acquisition of SIU Compliance Solutions. The combined company now offers a broader anti-fraud solution to the insurance industry.

Second, last week the House Financial Services Committee released a report showing that compliance with Dodd-Frank will consume 24 million man hours annually. To put a fine point on that statistic, it was noted by several members of Congress that it only took 20 million man hours to build the Panama Canal.

Today’s regulatory burden coupled with the compliance requirements of a variety of new pronouncements has companies scrambling for better solutions to manage, monitor and report on compliance. It is this end-user demand for more efficient solutions that is driving value to those compliance providers that have leveraged technology to help more efficiently solve their customers’ needs. SIU Compliance Solutions consulting domain expertise was the driving force behind the most recent deal. Combined with GlobalOptions technology, the SIU consultants are now armed with an even greater, more cost effective tool, to assist their clients with compliance solutions.

It is our belief that the markets will see continued M&A and Financing activity in the compliance space as the end user demand is growing and is a “must spend” item. Moreover, we expect to see continued convergence across Data, Technology & Services to create best of breed solutions. The combination of domain knowledge, relationships and “Better, faster, cheaper” (Technology enabled) solutions will continue to propel activity.

We continue to do research and evaluate and track this market. We remain confident that the deal activity and economic rewards for investors in the space will be plentiful. As one of the only investment banks with a concerted effort in the Compliance space, we expect to be quite active in the coming months and years.