IRESS LIMITED — M&A Activity 2011

Jan 17, 2011

Media
Release:
18
January
2011

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**SIGNIFICANT

EXPANSION
OF
ACTIVITIES
IN
SOUTH
AFRICA**

ACQUISITION
OF
PERESYS
-­‐
LEADING
PROVIDER
OF SELL
AND
BUY
SIDE
FINANCIAL
TECHNOLOGY
IN
SOUTH
AFRICA

EXPECTED
PURCHASE
PRICE
OF
ZAR
375M FUNDED
AND
PAYABLE
FROM
EXISTING
CASH
RESERVES

**STRONGLY

EARNINGS
ACCRETIVE**

**FORMS

LEADING
SOUTH
AFRICAN
POSITION
IN
BOTH FINANCIAL
MARKETS
AND
WEALTH
MANAGEMENT**

**MANAGEMENT

AND
STAFF
RETAINED**

IRESS
announced
today
the
significant
expansion
of
activities
in
South
Africa
through
the
acquisition
of Peresys
(Pty)
Limited
and
Peresys’
technology
for
an
expected
ZAR
375
million
(approx
AUD
56.1m), before
transaction
costs.
Peresys
is
a
respected
technology
services
provider
in
the
South
African financial
markets
with
an
established
client
base
and
dominant
position
in
order
execution
and
FIX-­‐ based
routing
across
all
asset
classes.

Peresys
will
immediately
establish
IRESS’
financial
markets
division
in
South
Africa,
building
on
our existing
wealth
management
presence
that
together
forms
significant
scale
and
an
extensive
product range
in
South
Africa.
IRESS
believes
in
the
advantages
that
come
with
scale
both
for
its
own
operations, and
to
the
benefit
of
its
clients
through
product
opportunities
and
investment
in
initiatives.

Andrew
Walsh,
Managing
Director
of
IRESS,
said,
“For
some
time,
IRESS
has
assessed
the
opportunity and
timing
to
expand
our
presence
in
South
Africa
from
wealth
management
and
introduce
our
financial market
services
such
as
order
execution,
trading,
and
market
data.
The
combined
IRESS
and
Peresys service
offering
is
anticipated
to
grow
revenues
while
leveraging
the
largely
fixed
cost
base.”

“Peresys
is
the
clear
industry
leader
in
South
Africa,
which
IRESS
has
held
in
high
regard
for
some
time for
it’s
client
base,
breadth
of
product,
dedication
to
support
and
innovation,
and
positioning.
Through this
transaction
IRESS
will
expand
its
client
base
in
South
Africa,
create
immediate
and
impressive
scale with
future
growth
through
the
combination
of
Peresys’
local
strength
and
IRESS’
scale
and
additional product
options.

Together,
our
initial
focus
will
be
on
immediate
product
opportunities
based
around
introducing
IRESS components,
specifically;
retail
online
trading,
EMS,
portfolio
management,
and
market
data.
Beyond this,
we
will
review
technology
opportunities
based
on
demand
and
opportunity,
and
ensure
ongoing support
to
clients,”
said
Walsh.

• 1 -

Ashley
Mendelowitz,
CEO
of
Peresys,
added
“This
is
an
exciting
opportunity
for
Peresys
and
our customers,
who
can
look
forward
to
having
access
to
an
expanded
product
offering
from
IRESS.
We
will continue
to
do
the
things
that
have
made
us
an
integral
part
of
the
South
African
financial
markets
over the
past
decade,
including
retaining
the
same
values
and
our
strong
focus
on
domestic
requirements, innovations
and
local
support,
ultimately
ensuring
that
Peresys
remains
the
material
connection
point for
the
international
trading
community
to
South
Africa
and,
in
time,
the
rest
of
Africa.”

Management

In
South
Africa,
IRESS
divisions
of
financial
markets
and
wealth
management
will
be
led
by
Ashley Mendelowitz
and
Philippe
Moretonas
respectively,
both
reporting
to
IRESS
Managing
Director,
Andrew Walsh.
This
continues
our
well-­‐established
model
of
highly
experienced
and
knowledgeable
local management
and
staff
to
drive
local
initiatives
and
requirements
into
the
product
set,
as
well
provide strong
local
support.

In
respect
of
Peresys,
the
management
team
will
continue
in
existing
capacities
and
gradually
take ownership
of
local
delivery
as
more
of
the
IRESS
product
set
is
introduced.

In
respect
of
IRESS
Australia,
realising
the
opportunities
available
from
our
increasingly
diverse
and significant
international
operations
has
prompted
a
necessary
but
modest
increase
in
costs,
including the
appointment
of
a
Chief
Operating
Officer
as
management
capacity
is
expanded.

**Financial

Considerations**

• Existing
  Peresys
  revenue
  of
  ZAR
  101.3m,
  EBITDA
  ZAR
  39.4m
  (year
  ending
  March
  2010)
  (approx AUD
  15.1m
  and
  AUD
  5.9m
  respectively).

• Peresys
  recurring
  revenue
  of
  95%.

• Purchase
  price
  of
  ZAR
  340.5m,
  plus
  expected
  ZAR
  34.2m
  performance
  based
  earn-­‐out
  payable over
  three
  years
  (approx
  AUD
  51.0m
  and
  AUD
  5.1m
  respectively),
  payable
  in
  cash.
  Acquisition costs
  expected
  to
  be
  no
  more
  than
  AUD
  0.7m.

• Incentive
  arrangement
  in
  place
  for
  executive
  and
  key
  staff
  to
  encourage
  transition
  and

• retention.

• No
  significant
  day
  one
  synergies.

  • Where
    corporate
    functions
    are
    common
    between
    the
    existing
    wealth
    management business
    in
    South
    Africa
    and
    Peresys,
    teams
    will
    be
    amalgamated
    locally;

  • Product
    synergy
    to
    occur
    over
    time
    and
    immediate
    growth
    opportunities
    exist through
    opportunities
    from
    IRESS
    product
    range
    in
    South
    Africa;
    and

  • Some
    modest
    cost
    base
    increases
    in
    Australia
    reflecting
    broader
    operations
    and delivery.

• Acquisition,
  plus
  associated
  cost
  base
  increase,
  remains
  materially
  EBITDA
  accretive
  for
  IRESS in

• IRESS
  will
  fund
  this
  acquisition
  through
  its
  existing
  cash
  reserves.

• IRESS
  is
  still
  in
  the
  process
  of
  confirming
  the
  taxation
  consequences
  of
  the
  transaction.
  Details are
  expected
  to
  be
  articulated
  at
  our
  upcoming
  annual
  results
  in
  February.

**Strategic

Highlights**

• Peresys
  is
  a
  successful
  well-­‐established
  and
  highly
  regarded
  business
  servicing
  key
  players
  in the
  South
  African
  markets.

• Peresys
  product
  suite
  spans
  the
  entire
  range
  of
  sell-­‐side
  and
  buy-­‐side
  components
  and delivers
  a
  significant
  order
  routing
  network
  connecting
  local
  participants
  and
  international clients
  to
  South
  Africa.

• The
  Peresys
  execution
  and
  order
  routing
  network,
  combined
  with
  IRESS’
  existing
  connectivity networks
  in
  Australia,
  New
  Zealand,
  and
  Canada
  now
  represents
  an
  expanded
  trading

• 2 -

community
of
buy
sides
to
more
than
150
brokers.

• The
  South
  African
  cash
  equity
  market
  is
  approximately
  30%
  in
  traded
  value
  of
  Australia
  and features
  similar
  breadth
  of
  participation
  and
  sophistication,
  with
  strong
  domestic
  attributes.

• This
  acquisition
  positions
  IRESS
  in
  South
  Africa
  with
  an
  established
  base
  for
  future
  growth through
  combined
  strength
  in
  local
  financial
  markets
  experience
  and
  products,
  with
  IRESS products
  and
  scale
  to
  create
  additional
  opportunities.

For
further
information,
please
contact: Andrew
Walsh Managing
Director
-­‐
IRESS +61
3
9018
5800

Ashley
Mendelowitz CEO
-­‐
Peresys +27
11
575
0679

• 3 -