First Derivatives’ acquisition of a majority shareholding in Kx Systems gives the company ownership of the kdb+ technology stack, access to over 100 Kx customers and a business unit that is expected to be earnings enhancing in the current financial year.
First Derivatives, a Newry-based provider of software and consulting services to the financial services industry, has worked with Kx for many years. It took a 20.1% stake in the company in 2009, before acquiring a further 46.47% to achieve ownership of 65.2% last week. Consideration for the additional holding was £36 million in a mix of cash and shares. First Derivatives also agreed to acquire the remaining shareholding of Kx from its founders at their request and at the same valuation within the next seven years.
Kx will operate as a separate entity within First Derivatives’ group structure and will continue to be led by co-founders Arthur Whitney and Janet Lustgarten. Lustgarten, who is CEO at Kx, is also expected to join the board of First Derivatives. All Kx employees remain with the company and First Derivatives says there will be no change for Kx’s 100-plus customers, which include nine out of the top 10 global investments banks and a number of exchanges, regulators and hedge funds.
Before acquiring a majority stake in Kx, First Derivatives offered the Kdb+ time series database to customers under an OEM agreement. It also used, and will continue to use, Kx technology to power its Delta trading, risk and data platform. Adding the Kx technology to its stack, First Derivatives says it will address big data issues in the financial services market by offering customers the ability to build big, fast data solutions using kdb+ and its consultancy services, or buy applications based on its Delta trading, risk and data platform. The company also intends to push the Kx technology into other vertical markets.
Brian Conlon, CEO art First Derivatives, says: “Having worked closely with the team at Kx for more than a decade, First Derivatives understands the power and value of kdb+. Together we look forward to exploiting its capabilities to their full potential as we further penetrate the financial services sector and build on the foothold that has been established in other vertical sectors. We intend to make significant investments in Kx to allow the founders and their team to scale the company while staying true to its heritage.”
While First Derivatives has global reach through operations in London, New York, Stockholm, Singapore, Hong Kong, Sydney, Toronto, Philadelphia and Dublin, the acquisition of a majority stake in Kx is expected to call for a strategy for China, where Kx has a handful of direct customers and OEM agreements.