GC Friday Interview: Robin Bedford, CEO, Opus Fund Services on AlphaMetrix360 Deal

Following AlphaMetrix's decision to enter into orderly liquidation, the company’s fund administration arm, AlphaMetrix360 (AM360), went up for sale in November but ultimately ended up being absorbed by Opus Fund Services on January 22. Opus CEO Robin Bedford explains how this untraditional deal took place.
By Jake Safane(2147484770)
In October 2013, AlphaMetrix CEO Aleks Kins told investors that the company was experiencing “significant cash flow issues,” which later that month led to the company’s decision to enter into orderly liquidation. As part of these unfolding events, the company’s fund administration arm, AlphaMetrix360 (AM360), went up for sale in November but ultimately ended up being absorbed by Opus Fund Services on January 22. Several Opus executives previously worked at Spectrum Global Fund Administration, and considering that the core of AM360’s business came from the AlphaMetrix’s 2010 acquisition of Spectrum, the company already had an understanding of the business, which eased the transition. Opus CEO Robin Bedford explains how this untraditional deal took place.

How did the decision to acquire AM360 come about and what was the process like?

RB: Initially the opportunity presented was not very attractive to us. It began with AlphaMetrix attempting to package [AM360] up as a stand-alone business and resell it. It came with a price tag that we were not interested in paying. However, the situation was changing on a near daily basis. As news came out that the business was insolvent and that there were potential accusations of wrongdoing, the clients started leaving, staff looked for new opportunities elsewhere, and the situation started changing very rapidly. We were originally viewed as a potential acquirer, but in the end I think we took the role of white knight. There were a number of suitors sitting at the table that fell away one by one and we were left as the last man standing. With our connections to the old Spectrum business, we were a safe harbor for these clients to turn to. However, due to potential future litigation, this wasn’t a simple business acquisition. It had to be structured in a way to ensure that Opus was not indirectly put at risk. We didn’t actually agree to make any payment for the business right up until the last minute, when we were asked to contribute a nominal amount to assist the court appointed receiver with fees.

How many of the clients were you able to absorb?

RB: Having signed a non-disclosure agreement, we were unable to start talking to clients as soon as we would have liked. It was difficult watching the clients leave on an almost daily basis, knowing competitors were approaching them and that our hands were tied. More clients were lost than was possibly necessary, however, we estimate that 30-40% of the clients formed part of this deal.

What are some of the risks in taking on these clients?

RB: The major risk was that [AM360] and their clients needed a company to move very quickly. That’s why Opus was successful here. We had to step into the shoes of AM360 across all clients, not on a selected case by case basis. We normally go through a lengthy sales process to fully understand each client, but we didn’t get to do that here in as much depth as we would have liked. However, our experience with the Spectrum business and VBO [Virtual Back Office] platform gave us an advantage and we managed to mitigate a lot of the risks associated with this transaction.

What will happen to AM360’s staff?

RB: AM360 had a very robust business that had the misfortune to fall victim to unrelated difficulties at the corporate parent level. We had initially planned on keeping their entire Columbus, [Ohio] office to service the clients. However over time it became clear that that vision needed to be changed. We attempted to transfer the staff across to our Chicago office. Some did come, and we have offers with relocation packages out to some other staff members. These discussions are still ongoing.

What do you see as some of the benefits of the deal?

RB: Apart from the obvious AUM spike, and client base increase, 2014 is business as usual for us. We’ve enjoyed exciting organic growth in 2013 and have over 30 new client relationships in December and January alone. We expect this growth trend to continue and have a very healthy sales pipeline in place. The AM360 clients moving to Opus are in addition to this, and there are obvious benefits of getting a complete package of clients from one single source. We have received a lot of positive feedback about this transaction, showing that this is being viewed by the industry as a sign of Opus strength.

What are Opus’s goals going forward? Are there any other targets on the horizon?

RB: We have had discussions with many competitors over recent years. Unfortunately in our industry, everyone is a buyer and there are very few sellers. However, we will continue to do deals where and when they make sense for us and our clients. In 2014 we expect to open a new operations center in the U.S., and we are currently working to get a licensed administrator set up in the Cayman Islands. However, we are still very U.S. focused and don’t plan to dilute our product by experiencing the issues that go hand-in-hand with expanding to other geographical locations. We will remain focused on the U.S. for at least the near future.

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