IBM to acquire Algorithmics for $387 million; risk analytics for financial firms

IBM on Thursday announced that it would acquire Algorithmics, a risk analytics firm that serves the financial services industry, for $387 million.

The company is a member of the Fitch Group, which is majority-owned by Fimalac, a holding company based in Paris, France.

The deal adds to IBM's existing business analytics portfolio and targets the banking, investment and insurance industries. Toronto, Canada-based Algorithmics specializes in helping those companies manage risk and opportunity, integrate information and create a strategy.

(What kind of risk, you ask? Exposure in terms of market, liquidity, credit, operational and insurance as well as economic and regulatory capital.)

The deal gives IBM more firepower in convincing chief financial officers that their software and services can help mitigate corporate risk. Algorithmics counts more than 350 clients, including 25 of the top 30 banks and two-thirds of leading insurers; Allianz , BlueCrest, HSBC, Nedbank, Nomura, Societe Generale and Scotia Capital are all customers.

It also comes at an opportune time, since the latest global economic downturn has pushed financial concerns back to the forefront. The hope: that IBM's newly-bolstered analytics portfolio can help financial firms avoid the lending and credit pitfalls of years past, especially in light of new regulatory requirements.

IBM's existing Business Analytics and Optimization team counts more than 8,000 consultants -- including 200 mathematicians with more than 500 patents. The 900-head Algorithmics team adds resources focused on credit, market and liquidity risk, plus a few key customers in operational risk.