February 8, 2012

Compliance Deal Activity Starting to Percolate

A few months ago we wrote about the Enormous Market for Compliance Solutions. Our team has been focused on the space for the past three years and we continue to see increasing activity and growth in the market. More importantly, the Private Equity community and larger strategic aquirors are finally waking up to the tremendous market potential for this industry. As of a couple of weeks ago, the deal activity is starting to reflect the increased interest level in the space.

SAI Global (ASX: SAI) acquired SaaS GRC software provider Compliance 360 in a pure play transaction last week. The deal, inked at a very attractive multiple, is the start of what we believe will be a consolidation amongst several of the smaller GRC software vendors. In addition to the Compliance 360 deal, last week we saw The Riverside Company (a Private Equity firm) announce their plan to merge ELT, EthicsPoint & Global Compliance into a market leading GRC technology and services vendor. They are throwing down the gauntlet in the space and making a bet on the power of aggregating best of breed content and technology to deliver on a global basis. We applaud Loren Schlachet, Managing Partner at The Riverside Company for his vision and we wish Mark Reed, the CEO of the combined entity, the best of luck on the new venture. We think it is well positioned to capitalize on the increasing spend in the Compliance space that is being mandated by governments around the globe.

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 space, we expect to be quite active in the coming months and years.