A New Buying Trend

Merger And Acquisition News

Well, it has been a while since I have written about any major M and A activity from within the Biometrics Industry.  Lately, I have been writing about applications, and my rantings and ravings about the Federal Government involvement in Biometrics.  The Biometrics Industry is not one to see a lot of buyout activity, but when it does happen, it happens with a huge bang.  It for sure makes the headline news.  The most recent activity which happened occurred in the 4^th quarter of 2010, when there was something like 3 major ones. 

And, these were utterly huge.  I think there may have been one or two smaller ones I have written about.  But it has been some time, so here goes the news.  A Biometrics/Security Vendor known as “CSIdentity Corporation” has just announced it has rather successfully completed the 100% buyout of another Biometrics/Security Vendor, known as “IdentityTruth, Inc.”.  Both of these Vendors specialize in Identity Theft, but the latter focuses a lot more on Biometrics Solutions, primarily upon Voice Recognition. 

Here are the details of this latest M and A activity:  “CSIdentity Corporation, the industry's leading provider of wholesale identity theft protection and fraud detection solutions, has successfully completed its acquisition of IdentityTruth, Inc., a privately-held company based in Waltham, Massachusetts. The acquisition complements CSIdentity's industry leading product and service offerings by adding the IdentityTruth proprietary technology and analytics to its product set . . . CSIdentity funded the acquisition of IdentityTruth with cash from existing profits and funds from Investcorp Technology Partners, its anchor investor. "IdentityTruth represents a logical extension of CSIdentity's product portfolio and will make a significant contribution to the high growth trajectory CSIdentity is operating on," said Alex Guira, co-head of Investcorp Technology Partners . . . CSIdentity now employs more than 80 employees in Austin, Texas, San Diego, California and Waltham, Massachusetts and has a growing technology and patent portfolio unmatched by other identity theft solution providers.”  (SOURCE:  http://www.findbiometrics.com/industry-news/i/8815/).  

Final Thoughts On Today’s Posting

As mentioned, this deal is mostly one dealing with Identity Theft products and solutions. The buyer is going to use the buyees intellectual property to complement its own line.  What is interesting is that this buyout is not being funded with internal resources, such as stock swaps or using existing cash on the balance sheet.  A bulk of the funding is coming from an outside investor, as can be seen in the above quote. 

So far, all of the M and A activity I have written about, I believe has come from internal funding sources.  But if you look at it from another perspective, the fact that an outside capital investor is willing to front the cash needed means that there could very well be some optimistic signs that the economy could be on some sort of recovery.  Granted, this is just one investor out of who knows how many hundreds of thousands here in the United States, but as of recent, how many headlines have you heard of external funders coming in???  Very, very few, if any.  There are always two sides to everything, and thus it is very important to look at things from this angle.  As a result of this buyout activity, the buyer will now have a much larger workforce, employing some 80+ people. 

What is my take on all of this???  Continue to expect this kind of buyout activity well into the future.  As long as the threats and risks posed by Identity Theft are still out there, the Security Vendors will do whatever they can to keep up, even if it means enormous amounts of takeovers.  For example, according to the Press Release, just in 2010 alone, some 11,000,000,000 + Americans were victims of Identity Theft, close to 90% of businesses and organizations worldwide have been impacted, and just in the United States alone, the costs of Identity Theft are as much as $54 Billion.  So, these statistics only back up my hypothesis and projections just that much more.  But, watch for another interesting trend to occur. 

As the risks posed to Identity Theft continue to proliferate in the near future, watch for these Security Vendors who specialize in this area to outright purchase some Biometrics Vendors. Why do I say this???  Well, as mentioned the Security Vendors are in a cat and mouse game to try to keep up with the attackers.  It’s a never ending battle.  But, by incorporating another type of unique solution, such as Biometrics, will just add another arsenal to the Security portfolio.  I mean why try to invent something when you can just buyout the intellectual property of another company, rebrand it, and make it your own???  Who knows, maybe the next Posting I write on this will be about this very type of M and A activity.  So, stay tuned . . .