Advent Software announced late Thursday that it would acquire Black Diamond Performance Reporting for $73 million, and that Black Diamond's management team, led by founder and CEO Reed Colley, will operate as an independent business group that will "lead Advent's advisory strategy."
The acquisition is expected to close in the second quarter of 2011, and Advent says it expects Black Diamond—which has grown revenues by more than 40% over the last two years, according to the announcement—to contribute about $1 million per month of recurring revenues to Advent. The acquistion thus would value Black Diamond at about six times revenue.
Colley will become general manager of the Black Diamond group and will report to Peter Hess, Advent's president.
In a statement, Colley said that with the acquisition by Advent, "Black Diamond now gains access to resources to accelerate both our product development and growth," while Advent pledged to "continue to invest in and evolve the Black Diamond platform, as well as its Advent Portfolio Exchange (APX), Moxy, Advent OnDemand, Axys, and Geneva platforms, with each serving distinct client segments."
In an interview on Friday with AdvisorOne, Colley (left) placed the acquisition in the context of Black Diamond being able to provide a "positive impact on the marketplace," and that part of the attraction with Advent was its ability to take advantage of its "resources and knowledge; working with somebody who's been doing this for 28 years, to really do great things for advisors." He said that Black Diamond has conducted about the same amount of due diligence on Advent as the public company had done on Black Diamond to ensure that it could maintain its culture of innovation and service to advisors.
In that same interview, Hess said the acquisition was designed to "bring an even better solution to the advisory marketplace." Hess said Advent had learned in particular with its Geneva platform, which serves the hedge fund industry, that focusing on a specific vertical market paid dividends in multiple ways; that business now accounts for a third of Advent's business, he said. In its due diligence on Black Diamond, Advent "gained such an appreciation for Black Diamond's culture and innovation." Hess said that when you partner with a vendor, "it's always about the journey; we'll all be riding the Black Diamond train. Colley said "it's not in Advent's interests to squash our culture."
Dan Skiles, executive VP of Shareholders Service Group, the RIA custodian and services provider, and a long time participant and observer of advisor technology, called the acquisition a positive sign for advisors that showed there's "a lot of value in serving advisors, especially RIAs." In addition, he called the acquisition a "fantastic entrepreneurial story," lauding Colley and his management team for building great technology and a company that has experienced rapid growth since its founding in 2003. "The entrepreneurial spirit serving advisors is alive and well," he said.
As for Black Diamond's future, Skiles (left) suggests that Advent was smart to keep a "great entrepreneurial management team together," and that Colley's decision to sell to Advent was likely meant to "benefit his current and future clients." For Black Diamond's competitors, says Skiles, the deal should also serve as a "shot in the arm" that helps validate their offerings, that "what I'm doing is valuable," but also impart a "sense of urgency" to improve their own products.
One of those competitors is Orion Advisor Services, whose founder and CEO, Eric Clarke, took a more cautionary approach to the news. "I was surprised," Clarke said in a Friday interview. "I see all the reasons why Reed [Colley] made the decision," but to Clarke, "it looks identical to the TechFi situation." Clarke was referring to
Hess and Colley addressed the TechFi allusion directly in the interview. "We've been effective," Hess (left) said, in many markets, but "not so much in the advisory space. That was one of the attractions of Black Diamond."
