Wilmington-based corporate back-office service provider CSC has made a play to become a major international global private funds administrator, thanks to the recent acquisition of PEF Services.
Before the acquisition, CSC didn’t have a significant US fund administration business, said Anne Anquillare, PEF Services CEO and now head of CSC’s US fund administration unit. “We are now their US fund administration arm,” she told Private Funds CFO.
From stateside, Anquillare and the PEF team will patch into CSC’s international network and introduce private funds clients to CSC’s own suite of offerings, including fund administration, custody and treasury services.
It is all part of an emerging consolidation trend as private equity matures and goes global. Recent acquisitions include Apex Group’s purchase of Israeli fund administrator Tzur Management in May. In April, global administrator TMF Group completed the purchase of Venture Back Office – a US-based servicer of private equity, real assets, credit and emerging manager funds – after completing a string of international acquisitions. Those included State Street’s fund administration business in the Channel Islands, IQ-Nexus in The Netherlands and Selectra, a third-party alternative investment fund manager management company in Luxembourg.
For Anquillare, the transaction represents the successful end of four years of looking for the right partnership to grow the firm to the next level. CSC was “interested in our people, our processes and our technology,” she said. “I’ve spent 20 years building this masterpiece and to see someone come in and take it apart like a Lego set would have broken my heart.” CSC proved a perfect fit in large part because of the lack of overlap in services, Anquillare added.
The two firms even use the same software platform for accounting. Both use Investran, from which PEF operates its investor portal, Viewpoint.
The fund administration business is undergoing consolidation as private equity funds become more complicated, offering more services to a global clientele, she added, meaning that for many such providers, the choice will be to grow or struggle to compete.
PEF Services, founded in 2002, started out by servicing the mid-market of the US private funds industry with a focus on small business investment corps, known as SBICs, in the US. Later, it expanded to serving a wider swath of alternative investment vehicles and illiquid alternative asset firms that are subject to the special requirements of LP investors.
Over time it developed what Anquillare called informal, as-needed relationships with service companies in the Cayman Islands, Luxembourg, Ireland and elsewhere.
But these informal networks proved fragile, coming under pressure from overseas firms executing mergers and strategies aimed at establishing a base in the United States – PEF’s home market.
“Many of those folks don’t play nice in the sandbox,” said Anquillare. “So, we needed to develop a more formal international network.”
Also driving vendor consolidation is customers wanting more comprehensive services under the fund administration umbrella. “A lot of this has to do with fund connectivity,” said Anquillare. “When they have an update for investors, they don’t want to hand it to five different vendors. They want to give it to one” to distribute across the service set.
Private fund organizations have grown more complex over the past five years and there is a “need to share this data across many different services and in many jurisdictions,” she added.
John Hebert, executive vice-president with CSC, called the merger an “aqui-hire” because of PEF’s expertise and technology. The deal resulted in an additional 50 private equity experts to CSC’s business, he said. He also estimated the merger has accelerated CSC’s expansion plans by five years.
According to Hebert, CSC’s long-term aim is to become a preeminent global service firm offering fund managers integrated back-office services, including trust and loan, entity formation and others.
The synergies have already begun, according to Anquillare. From the day the merger was announced, clients have started asking for introductions to other jurisdictions for fund administration, as well as other CSC corporate and legal services. “I don’t have to imagine the synergies,” said Anquillare. “They’re already happening.”