Although M&A activity picked up late in 2012 and in the first quarter of 2013, overall 2012 was a slow year, as was the entire post-financial crisis period. Despite low interest rates and huge amounts of cash on corporate balance sheets, M&A activity over the past few years has been subdued.
But subdued M&A activity is not the same as no M&A activity. Deals were closed last year and these deals had an impact on every financial institution’s client and reference databases. The targets all have new ultimate parents, many had address changes and in some cases their domicile has changed. When I discussed this issue with several clients and asked them to check if the changes created by some of deals were reflected in their “golden copy,” several were surprised to discover that their data was out of date. These errors had flowed through to a number of other silos within their organizations, and they expressed concern about some quality aspects of their database they thought they had under control. When I left they were happy that I had come, but seemed happier that I was leaving.
How many deals are there that matter?
In 2012 there were over 350 deals announced in the financial services industry with a deal value of over $100MM. This includes deals where the target was a commercial bank, a bank holding company, credit union, investment or commodity firm, a broker-dealer, or an exchange. In these deals the targets were very likely to be clients or counterparties of other financial institutions. Of these deals more than half were cross-border.
While every firm subscribes to one or more corporate actions feeds to support trading operations and reduce financial risk, our experience is that many firms are not focused on corporate events that may affect their reference data repositories and the risk ratings of their clients and counterparties. The Alacra Authority File was created to meet these needs.
The Alacra Authority File is a database of 210,000 entities that are the common clients and counterparties of large financial institutions – regulated, listed, rated and having certified CICIs. To keep the Alacra Authority File up-to-date, Alacra monitors dozens of sources so we are alerted about merger and acquisition activity, spin-offs, bankruptcies and any other event that might lead to a change in an entity’s ultimate parent or address. Our research team then investigates the alert and makes changes to the database when they confirm the event has occurred. These events can be seen in Alacra’s Counterparty Intelligence Application and are reflected in the change feeds we send to clients every day.
Keeping reference data repositories or your “Golden Copy” accurate and up to date is an expensive, time-consuming process. The expected increase in M&A activity is one factor that will make this harder in the near future. The Alacra Authority File can help.
Ask Alacra to do a free checkup of the health of your reference data. We’ll prove to you we can improve the accuracy and add value to your client and counterparty data.