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Investment Strategy and Commercial Due Diligence: Target Assessment and Investment Thesis Substantiation

Client

Large US-based multi-billion-dollar Private Equity Fund

Function

Market research, target screening and vendors’ pre-due diligence

Asset Class

Fixed Income
Equities
Listed Derivatives

Geography

Global

Duration

2 months

The Ask

The client, a US-based multi billion-dollar Private Equity Fund, considered investing in companies that specialise in electronic trading systems across cash equities, listed derivatives and fixed income. The client’s assessment of the investment opportunity was incomplete by having limited knowledge of electronic trading across those asset classes.

The client suspects that there may be synergies between asset-class specific solution providers, covering different parts of trade lifecycle. Therefore in addition to asset-class specific assessment of market opportunity, GreySpark was asked to validate client hypothesis on the opportunity for a multi-asset offering.

Methodology

The project was delivered in three stages, starting from a study of the area least known to the client – fixed income, followed by cash equities and listed derivatives, to conclude with the study of the opportunity. To provide high quality analysis and recommendations, information for the analysis was sourced from:

  • Existing knowledge, benchmarks and models from Capital Markets Intelligence practice
  • Market segmentation; bottom-up assessment of the spend on the trading solutions
  • Interviews with relevant capital markets e-trading specialists on buyside and sellside
  • Analysis of the market size and the opportunity was based on GreySpark FinTech team’s proprietary models

Outcome

The client received three part analysis that summarised for each asset class in the scope:

  • The trading process from functional and technology view;
  • Ongoing regulatory initiatives and expected changes to the market structure;
  • Existing trading patterns across buyside and sellside;
  • Market sizing models across APAC, Europe and North America, across all sizes of trading businesses;
  • Overview of the existing vendor offering.

Additionally, the client received a study on the opportunity for the potential target multi-asset offering. Those written deliverables were followed by three workshop with the client in order to address all outstanding questions.

GreySpark Delivered Benefits

  • The client was able to take an investment decision that was based on an in-depth understanding of the industry and sector the target companies operate in.
  • Access to industry practitioners that worked with the analysed technology providing an insight into the real-life scenarios where the technologies are and are not in synergy, which provided a deep understanding of the potential future hurdles with the investment opportunity.
  • A comprehensive supporting documentation and detailed assessment of case studies provided confidence to the investment committee that the analysis was built on solid information and on valid assumptions.

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