Norway-based Viz was founded in 1992 and has an established client base throughout Europe, with long-term clients that include major energy producers and traders. Viz’s Elviz ETRM will be Brady’s lead product to the energy sector and provides trading and risk management solutions for electricity, gas, coal and emissions. According to Brady, Viz’s product range will be combined with Brady’s existing offerings as part of the company’s “single source – single view” strategy to provide comprehensive solution sets for specialist markets. This will ensure clients have access to a single trading and risk management solution for the whole lifecycle of all commodities, including metals, softs and energy products.
Gavin Lavelle, Brady CEO, said, “It is Brady’s aim to be the definitive global partner of choice for trading, risk management and settlement solutions across all commodities and energy products. Viz Risk Management will greatly strengthen our offerings in the energy markets in the same way that our recent acquisition of Viveo enabled us to broaden our support for softs and agricultural asset classes, in addition to our established expertise in base and precious metals.” He added, “This will be of enormous benefit to both Viz and Brady clients as energy is an important input price into the industrial companies producing or fabricating commodities. We have a successful track record of fast and efficient integration of acquired companies and are confident that clients will quickly see tangible, long-term benefits from this latest acquisition.”
Frank Carlsen, Viz CEO commented, “Elviz ETRM is seen as the market standard for European energy trading and risk management. Our close working relationships with the energy markets have resulted in Viz providing the most advanced solutions for real-time trading, pricing, analysis and risk management currently available. Viz becoming part of Brady makes excellent strategic and commercial sense, and also provides a major opportunity to take Elviz ETRM to the wider, global energy community. We believe Brady’s complementary solutions, geographical coverage and strong balance sheet will help us serve our customers and accelerate our growth.”
Brady believes the acquisition has a compelling strategic and financial rationale and it is expected to provide the company an excellent opportunity to facilitate further growth and extend the geographical reach of the company into Northern and Eastern Europe. It follows the successful acquisitions of Viveo, in March 2010, and Comsoft in 2009, both of which have “significantly grown and are performing ahead of initial plans.” Brady says that it will now be able to offer its clients full cross-commodity coverage, with integrated solutions for the entire lifecycle of commodities and energy trading from capture, through processing, inventory, invoicing and ultimately reporting P&L on the trades.
Brady has a strong position in the metals CTRM software space and, in our yet-to-be-issued study into Non-Energy CTRM Vendor Perceptions, it is perceived as a strong challenger and a market leader in the metals space. VIZ Risk Management is well-known in Europe where it ranked 13th in unprompted brand recognition in CommodityPoint’s 2009 Vendor Perception Study. It has 39 customers across Europe with the bulk of those being in Scandinavia, but it had begun to successfully move out of its Scandinavian base with deals in the United Kingdom, Switzerland and other European locations. Viz utilizes a leasing model for its Elviz software.
In terms of increasing Brady’s size and reach, this appears to be a good deal as it adds true energy capabilities to its suite of platforms, including electric power, which is arguably the most difficult energy commodity to tackle. Elviz has not yet reached the status of being viewed as a top tier product in European ETRM software markets, having been hindered by its regional presence and origins in Scandinavia, its lack of a sales force and an overall lack of visibility in the broader European markets. Still, the company has landed a number of major customers including Statoil, Norsk Hydro, EGL and Avenis / EOS. Brady brings an experienced sales and marketing organization which, when combined with the company’s ready access to capital, will be well-positioned to address many of these issues directly. Additionally, there are many cross synergies in terms of installed bases that can be leveraged as commodity companies continue to trade a wider portfolio of commodities. In the short-term, CommodityPoint sees good value in the proposed acquisition for both Brady and Viz, including an extended commodity reach, an ability to leverage each company’s strengths and improved economies of scale for the larger combined organization.
Upon closing of the acquisition, Brady will immediately be propelled into a top six CTRM vendor slot and perhaps even the top four in terms of revenue. While OpenLink and Triple Point are ahead by some distance, this acquisition will give Brady combined revenues in a range broadly comparable to Allegro and Solarc. Brady has a strong track record of successfully acquiring other vendors and continuing to grow and strengthen their underlying business, and with this latest acquisition, the company will be the largest indigenous European CTRM vendor today.
Though an important step in Brady’s evolution, the true value of this deal will most likely be realized in the medium to longer-term. No ETRM vendor can serve all of Europe’s regional power, gas and other markets at the moment, and this acquisition will do nothing in the short term to help Brady expand into the North American market. Bringing the two product families together will also pose integration challenges and increase the complexity of future product development plans.
Still, from Brady’s point of view, the company will realize a number of benefits:
– Increased quality of earnings, including a rental model, bringing recurring revenue to >50 percent
– Revenue & product diversification
– Increased asset classes / entry into growing energy market
– Increased and broadened product and market expertise
– Opportunity for earnings upside–leverage Brady’s established sales platform and cross selling
– Furthers Brady’s strategy to become a European consolidator in a fragmented market with attractive growth drivers
– Broader shareholder base and increased liquidity for investors
For CommodityPoint, this is a compelling set of arguments, but we are also cognisant of the future challenges that a combined Brady and Viz may face. While this acquisition will clearly provide some near-term opportunities for new business in Europe, and though the deal follows the company’s established pattern of what are essentially non-competitive acquisitions, the geographic scope and impact of the deal will be limited. Though we have little doubt that Brady will be able to effectively leverage their latest acquisition, in order to challenge Open Link and Triple Point outside of Europe, the company will need a strategy for North American markets–and that could prove troublesome.
A CommodityPoint CommodityAlert
By Gary M. Vasey, Ph.D., Managing Director, Europe and AsiaPac, and
Patrick Reames, Managing Director, The Americas
Brady, the leading supplier of trading and risk management solutions for metals and commodities, has announced its intended acquisition of Viz Risk Management (“Viz”), a major European provider of risk management and trading solutions to the energy markets, with a focus on electricity, gas, emission certificates and coal. The acquisition will make Brady the largest European provider of specialist integrated trading and risk management solutions to the global metals, commodity and energy markets and propel it into a top six position globally based on revenues. The deal is anticipated to complete in December this year.
To fund the acquisition, Brady has also announced a successful share placing of £15 million with both existing and new investors, which will be used to finance the acquisition and also further increase Brady’s cash resources.