Specialist
Former executive at Acuity Knowledge Partners
Agenda
- Outsourced client spend growth outlook and impact of recession on client spending
- Key areas of outsourcing for financial services clients and Acuity Knowledge Partners’ competitive positioning vs peers in the KPO (knowledge process outsourcing) industry
- Cost base flexibility and potential to migrate headcount to low-cost jurisdictions
- Contract structure and pricing dynamics – technology vs services revenue
- Acuity’s acquisition of Cians Analytics – integration and synergies
Questions
1.
What does Acuity Knowledge Partners actually do day-to-day for clients?
2.
How would you segment Acuity’s business mix across investment banking, commercial lending, fund management and technology? How do you think about each vertical’s size relative to each other and as a portion of the overall business?
3.
Does M&A deal-origination sit alongside investment research, or does investment research sit underneath M&A and deal origination?
4.
Which individuals typically sign off on the contract with Acuity? Is it the same individual for investment research and M&A deal-origination at the bank, or are you typically selling to different people within the bank for each segment or vertical?
5.
How large is the technology vertical? You said it’s relatively new, or was a few years ago.
6.
How much outsourcing activity are you seeing? What are current outsourcing rates within the investment research vertical?
7.
Can the Acuity analysts do the end-to-end analysis, write the report and do the recommendation, or does that still have to be signed off by somebody in the organisation or bank that is issuing the rating or recommendation?
8.
How much scope is there for additional outsourcing to Acuity to improve contract economics or drive up ACV [average contract value]? Do you see much scope for additional outsourcing on the investment research side, or do banks not have much more to outsource from this standpoint?
9.
How do you see investment research contract dynamics and pricing evolving, particularly on the tier 1 side? Can banks be aggressive on renewal terms? Do they not accept price increases or is it relatively straightforward to increase price at renewal?
10.
Who is the typical candidate within Acuity’s investment research business, or for Crisil, Evalueserve and other big outsourcers? What’s the typical profile?
11.
Roughly what portion of the investment research business is secured with long-term contracts?
12.
How do you think renewal discussions are trending given the volatility in financial markets? How impactful is that on clients’ willingness to renew or the savings they seek when renewing?
13.
When the cycle turns and the market comes back again, do banks typically re-insource certain tickers, or do they just leave them outsourced? Is that permanent gains for the KPO [knowledge process outsourcing] industry?
14.
How do you think about Acuity’s competitive positioning within investment research relative to peers? I guess pricing and the quality of deliverables are the metrics that decision-makers will care about – it’ll be how those two factors interact with each other.
15.
Who would you say is a tier 1 KPO alongside Acuity? Who are the closest peers?
16.
Do you think there’s much pricing differentiation across Acuity, Crisil and Evalueserve?
17.
How difficult is it for a client to move from Acuity to Evalueserve or Crisil, or vice versa? How much friction would there be in such a switch?
18.
How common is it for banks to work with multiple KPOs for their investment research, depending on the industry vertical, region or anything else?
19.
What share of wallet would Acuity have or hope to have when in a tier 1, in terms of outsourced investment research spend?
20.
Are banks willing to give 100% of their outsourced investment research spend to one provider or KPO? Is there any reason why they wouldn’t do that?
21.
How do you think about the typical contract value? How much would a tier 1 typically spend on outsourced investment research services?
22.
How do you see the M&A due diligence vertical evolving in the short term given the lack of deal flow? What are the long-term structural trends as it relates to that cost centre being outsourced by investment banks?
23.
How do you think about the sustainability of EBITDA margins over the next 5-10 years? How would you expect EBITDA margins to evolve, given wage inflation in low-cost jurisdictions such as India and Sri Lanka? To your point, those are rising and also increasing in key delivery countries. How much of an impact could that have on profitability going forwards?
24.
Are EValue, Crisil and Acuity relatively similar in terms of margin profiles?
25.
How much of a threat do you view technology being over the next five years or so? How much of the data-gathering or number-crunching scope of work in existing contracts could theoretically be automated by tools used by the analysts at the bank? There are tools that will grab the latest financial report and update your model automatically – those are starting to come to market now. How impactful could that be on contract economics, if the scope was reduced?
26.
Are you seeing a divergence between headcount and revenue growth? How are you thinking about operating leverage in the cost base and how headcount scales with the number of clients won or revenue generated?
27.
What do you think was the rationale behind Acuity’s acquisition of Cians Analytics in September 2022? Are the two businesses complementary? Is there much overlap?
28.
Would Acuity gain any particularly differentiated capabilities through Cians? What has the company acquired? Is it just another similar KPO, or are there differentiated tools and services, whether in a different area within the investment bank or a different product type?
29.
Do you have any concluding thoughts to share about Acuity or its market?
30.
How well-positioned are KPOs to drive the technology adoption vs tech pure players on a global basis? Why would it be Acuity, EValue or Crisil providing these tools vs Bloomberg, FactSet or Refinitiv?
