Financial services based technology provider Broadridge Financial Solutions, Inc. (BR) recently announced its acquisition of Emerald Connect, LLC for $60 million in cash to cater to the needs of financial advisors.
The acquisition of Emerald Connect, LLC is part of the company’s strategy to build a portfolio of well modified branding, marketing and client communication tools to help them expand their businesses, increase operational efficiency and minimize risks.
Emerald Connect will be a strategic fit for Broadridge, as the business models of both the companies are almost identical. Emerald Connect’s solutions would complement Broadridge's sales, education and client communications capabilities, strengthening its platform and expanding it into the advisory market. Moreover, with this acquisition Broadridge will be able to deliver optimized solutions and a best-in-class experience to all its clients.
Emerald Connect, LLC is a leading provider of solutions-based marketing and technology tools for the financial services industry. The company is owned by an outsourcing solutions provider, StoneRiver Group. This acquisition will help Broadridge to evolve as a financial and outsourcing services provider, which in turn will help to eliminate business risks.
Earlier, Broadridge inked a deal to acquire a fee calculation, billing, and revenue and expense management solutions company – Bonaire Software Solutions, LLC. The acquisition was intended to enhance Broadridge’s market credibility as the automated compliance process offered by Bonaire will eliminate the risks involved in the manual process.
Broadridge has resorted to strategic acquisitions to diversify its offerings and expand its operating markets. The strong cash balance of $240.3 billion in the second quarter of 2014, up from $183.1 million in the previous quarter, enables the company to go for strategic acquisitions.
We believe that Broadridge’s cost reduction initiatives and solid growth in net new businesses are the positives going forward. We remain optimistic on Broadridge’s strategic acquisitions, new product launches, share repurchase program and dividend hikes. We also believe that its close association with Accenture (ACN) will create long-term opportunities for the company.
However, we remain concerned by the pricing pressures caused by significant competition from companies such as Barrett Business Services (BBSI) and DST Systems Inc. (DST).
Currently, Broadridge has a Zacks Rank #2 (Buy).