Competing on Analytics: IBM Acquires Algorithmics

IBM acquires Algorithmics; deal is latest step in series of investments IBM has made in predictive analytics, increasingly used by financial institutions to improve risk management efforts.

Indicating that the focus on deploying analytics tools to improve risk analysis capabilities continues to intensify, IBM (Armonk, N.Y.) announced it will acquire risk analytics firm Algorithmics (Toronto) for $387 million, subject to price adjustments at closing. Algorithmics is a member of Fitch Group, which is majority owned by Fimalac, a holding company based in Paris. Clients include The Allianz Group, BlueCrest, HSBC, Nedbank, Nomura, Societe Generale, and Scotia Capital.

According to IBM, this acquisition expands its business analytics capabilities in the financial services industry by helping clients quantify, manage and optimize their risk exposure across a range of financial risk domains including market, liquidity, credit, operational and insurance risk as well as economic and regulatory capital risk. With the combination of IBM and Algorithmics' analytics technologies, companies can measure and assess operational risk associated with lending processes, market and credit risk exposures, the vendor says, adding that this type of transparency and granular insight of financial risk in advance can help organizations meet new regulatory requirements.

"Combining Algorithmics' expertise with IBM's deep analytics portfolio will allow clients to take a more holistic approach to managing risk and responding to economic change across their enterprises," said Rob Ashe, general manager, business analytics, IBM, in a press release.

The Algorithmics acquisition is the latest in a series of investments IBM has made in predictive analytics. According to IBM, Algorithmics' risk advisers will enhance IBM's Business Analytics and Optimization practice. The Business Analytics and Optimization team has more than 8,000 consultants including 200 mathematicians with more than 500 patents and a network of analytics solution centers, backed by an overall investment of more than $24 billion in acquisitions in the last five years. Algorithmics' focus on credit, market and liquidity risk, as well as key customers in operational risk, will strengthen and expand IBM's risk consulting services, the company says.

The acquisition is subject to applicable regulatory clearances and other customary closing conditions. With the closing of this acquisition, approximately 900 Algorithmics employees will join IBM's Software Group.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio