Recently, Moody's Analytics, a division of
) agreed to acquire WebEquity Solutions, a developer of cloud-based
loan origination software for financial institutions. Although the
financial details of the deal were not revealed, the transaction is
expected to close sometime in the third quarter of fiscal 2014.
Omaha-based WebEquity was founded in 1985 has approximately 70
employees. The company generated near about $15.0 million in
revenues in 2013. The acquisition is expected to have a minimal
impact on Moody's earnings in the second, third as well as the
fourth quarters of 2014 and full-year 2015. However, the deal is
expected to be accretive to EPS in 2016.
WebEquity's leadership in software-as-a-service offering for
community banks combined with Moody's international reach and
expertise will help the latter to expand globally and enhance its
risk management portfolio for banks, insurance companies and
Acquisitions have given Moody's increased scale and cross-selling
opportunities across products and vertical markets. Since 2000,
Moody's has acquired a number of companies including KMV (2002),
Economy.com (2005), Wall Street Analytics (2006), Fermat
International (2008), CSI (2010), Copal Partners (2011), Barrie
& Hibbert (2011) and Amba Investment Services (2013).
We believe that the company will continue to pursue acquisitions,
which is a good strategic fit. This will also diversify its revenue
base over the long term.
On the flip side, increased focus on acquisitions could negatively
impact its balance sheet in the form of a high level of goodwill
and intangible assets, which totaled $886.8 million, or 20.2% of
its total assets at the end of 2013. Furthermore, acquisitions add
to integration risks, which may dilute earnings.
Moody's faces stiff competition in most of the markets in which it
operates. In the analytics segment, it faces competition from
Dun & Bradstreet
) and many others.
Currently, Moody's has a Zacks Rank #3 (Hold).
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