MphasiS on Monday informed the exchanges that it has entered into a definitive agreement to acquire US-based Digital Risk LLC in all-cash deal valued at $175 million (about Rs 960 crore) with an additional earn-out component. The Mphasis stock surged 4.5 per cent in early trade. Digital Risk is one of the largest independent providers of risk, compliance and transaction management solutions to the US mortgage market. “We began our journey of transformation in 2010 focusing on the financial services industry. This acquisition is central to our strategy of offering specialised services in chosen segments. Digital Risk offers highly specialised services in risk and compliance area, specific to mortgage industry. Their analytics platform combined with 1,500 mortgage specialists makes them unique and differentiated. I am delighted to have Digital Risk with their strong brand join our family,” said Ganesh Ayyar, CEO, MphasiS.
Digital Risk is expected to register revenues of $127 million in calendar year 2012. The company has grown at a CAGR of 70 per cent in the last three years, the statement said. “The need for risk management in the mortgage market is not only a US issue but also a global necessity. This acquisition provides the industry and clients a unique offering,” said Peter Kassabov, Chairman and CEO of Digital Risk. “We’ve developed proven processes, analytics and technology that are making mortgages safe and this expertise applies to markets outside the US. We are thrilled to merge our talent and expertise with that of MphasiS to set a global standard for making mortgages safe,” he said.
The transaction is currently expected to close by January 31, 2013 subject to regulatory approvals and other customary closing conditions. Upon completion of the transaction, Digital Risk will operate as a standalone business unit retaining its brand identity. Digital Risk’s founders will continue to lead the company, with Peter Kassabov reporting to Ganesh Ayyar, CEO, MphasiS. Digital Risk’s management team and employees will remain with the company and continue serving their customers. This acquisition significantly enhances MphasiS’ onshore presence in the US.
MphasiS has plans to expand its footprint in the US creating up to 500 new jobs in the near future. Avendus Capital acted as the exclusive financial advisor and Goodwin Procter LLP acted as legal advisor to MphasiS. Portico Capital Securities, LLC served as financial advisor to Digital Risk and Katz, Teller, Brant & Hild acted as legal advisor to Digital Risk.
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