As Risk Solutions Grows, So Does Its M&A Lure

FEBRUARY 10, 2015

By Jaewon Kang, excerpt from TheDeal.com, July 30, 2014

High margins and the near-constant appetite for risk management assets make the Risk Solutions division of LexisNexis Group a possible acquisition candidate, according to industry watchers.

Alpharetta, Ga.-based LexisNexis' Risk Solutions collects and provides security data analysis to professionals mostly in the insurance and financial service industries, and a source familiar with the company said its parent wants to continue building it by expanding operations and buying assets Already, the source said, Risk Solutions is one of the most profitable businesses within the stable of LexisNexis' parent, Reed Elsevier NV.

LexisNexis on July 22 said it will exchange its Polish legal assets for Wolters Kluwer NV's Canadian legal assets for an undisclosed sum. But that deal is nowhere near the scale that one for Risk Solutions would involve, according to John Blossom, president of Shore Communications Inc., a consulting firm for the content industry. "It's a strong product and has intellectual property," he said about Risk Solutions.

Blossom believes Equifax could be a potential suitor for Risk Solutions, while Dan Strempel, senior analyst at media industry research firm Simba Information, said he thinks D&B and Experian plc could also be interested in the business if LexisNexis decides to divest.

Though it has less revenue than the legal division, Risk Solution business has adjusted operating margins of 47%, making an alluring M&A candidate, Strempel said. Especially since there are simply more prospective buyers in the risk management space that could be suitors, he said.

"There's a lot of interested money looking at a spectrum of organizations that manage and work in the area of risk management," said Arnette Heintze, CEO of security management firm Hillard Heintze LLC.

He said there's constant appetite in the risk management market for such companies as organizations continue to seek ways of "enhancing regulatory, compliance and oversight."

As for its legal content unit, LexisNexis is one of the top players in the sector and competes with Thomson Reuters Corp., Simba's Strempel said.

While Thomson might want to buy the legal content unit, Strempel doesn't think it would be allowed to because of the monopoly it would create.

Another rival, Bloomberg LP, wouldn't face the same hurdle, Strempel said, but he noted that the company has already added girth in the legal content sphere with its 2011 acquisition of Bureau of National Affairs Inc.

The real suitors for the legal unit would probably be private equity firm, he said, given the slow growth of the legal business but its continued relevance.

"[It's] not a business that's in danger," he asserted. "Lawyers and legal researchers and folks in that field rely on LexisNexis."

 

We welcome your views. To submit a letter to the editor, send us an email to press@simbainformation.com.