Reuters has signed a definitive agreement to acquire AVT Technologies. AVT’s FX technology is behind such platforms as EBS Trader, FXall and Centradia, as well as many major bank proprietary platforms such as those of ABN Amro, the Bank of New York, Bank of America, Dresdner Kleinwort Wasserstein, JP Morgan, UBS Warburg and Westpac, among others.
The acquisition was due for completion in late December, and will see AVT transform into Reuters Automated Dealing Technologies (ADT), a division of Reuters Treasury Services. The net assets of AVT are expected to be in the region of £4 million at completion, and the companies estimate that their joint applications will have a client base of around 50 banks, translating to over 50,000 users.
According to Jas Singh, one of the founders of AVT who will continue on as business development director, the acquisition brings the company, “all the benefits that a big partner brings: global reach, a global sales force, branding and infrastructure”.
From the Reuters point of view, the acquisition of AVT is seen as a quick way of meeting the increasing demands of its clients. “We were in the automatic dealing space, but demands were getting more and more sophisticated in terms of the level of offering that the banks needed in order to add value to their clients,” says Julie Holland, managing director of Reuters Treasury Services. “When we looked at our treasury strategy, we saw there were gaps in several key areas, which led to a re-evaluation of what we were doing and the decision to take in AVT.
“Virtually every financial institution is concerned with eliminating costs in its business and moving to electronic trading. With this acquisition, Reuters is now positioned to be a clear leader in the high-growth automated dealing and limit order management offerings,” she adds.
Mark Redwood, formerly chief executive officer of AVT and now head of Reuters ADT, says that the company had been looking for a business partner for the past 12-18 months. “We found ourselves at a crossroads. Electronic dealing technology is increasingly accepted and we are expecting an explosion in volume,” he says. “The question became: do we, as a 100-person operation, have the resources to support this?
“At the same time, we have been focusing on top tier banking clients since 1995, but as we start to look outside of the top tier, the demands for support resources become higher,” he continues. “We offer the system as an ASP, but clients need global support, sales force, 24/7 coverage, all of which come at a price. We have the technology and “can do” mentality, but we didn’t have the scale.”
Business as Usual
Although the agreement makes Reuters the new service provider for rival EBS’s conversational service, EBS Trader, a spokesperson for EBS says it is “business as usual”. “The agreement we have with AVT is unaffected by any change of ownership and we look forward to continuing to work together,” the spokesperson says.
Both Redwood and Holland underline this statement. “Part of the agreement, part of the due diligence process, was ensuring that there would be no change in the service that EBS receives,” says Holland.
Singh notes that AVT’s business will operate as a standalone unit within Reuters, so those clients that previously dealt with AVT will continue to do so through the new unit. However, he adds that the AVT name will disappear in time in favour of the Reuters ADT branding.
Redwood stresses that there is to be no change in any development plans AVT had prior to the acquisition. “The main priority will be the linking of Reuters Automated Dealing [an ASP launched in May 2001] with [AVT’s auto pricing engine] Echo FX, but we will continue to look at other areas – nothing is ruled out,” he says.
The companies say that while there is overlap, both products have certain different capabilities, and the next year will see Echo FX augmented by functions from Reuters ADT. The next planned release of Reuters Automated Dealing, version 3.8, is still expected to be released in Q3 2003, and service patches will be available for existing releases, but current clients are intended to be migrated to the new platform over the next two years. The integrated Reuters/AVT product, Reuters Automated Dealing 4.0, should be available in the next 18 months.
With the exception of one, all of AVT’s staff will become part of the Reuters division, augmented by a further 20 Reuters people, 10 of whom are joining the new division from day one. The exception is director Mike Fenton, who will run AVT Systems, a sister company of AVT Technologies that is remaining independent. AVT’s development centre in Nottingham will become part of Reuters and continue its present functions.
The new management team will consist of five of the six existing AVT and two Reuters executives, a balance which is intended to maintain the current culture of AVT while taking advantage of Reuters’ global sales force, technical and support capabilities. “We were attracted not just to AVT’s technology, but also the way that they conduct their business,” says Holland.
One of the instant benefits that ADT will enjoy under its global umbrella will be access to Reuters’ presence in the Far East. “AVT was already strong in Europe and the US, and Reuters has a lot of people in the Far East that we can utilise,” says Redwood.
Reuters’ sales people are already being trained on the AVT system to ensure that no business opportunities are lost, and Holland says that the division will be taking on dedicated sales staff over the coming year.
Redwood says, “As successful as AVT is as a standalone company, by linking up with Reuters we join an established leader in the treasury market. We will benefit from a highly respected brand. Financial institutions will benefit from our best of breed trading solutions.
“The arms race between the banks should not be about how quick their servers are,” he continues. “It should be about how they concentrate on their core business. AVT was always going to be constrained by what the big guys want to do and how much support we could provide them with. Joining with Reuters removes the constraints.”