MphasiS Buys Wyde

In a second-of-its-kind investment in the insurance sector, Bangalore-based IT services company, MphasiS, a unit of Hewlett Packard Co., says it has entered into an agreement to acquire Wyde Corp., an Eagan, Minn., provider of insurance core systems software. Being the creator of insurance policy administration solution, Wynsure, the acquisition will become MphasiS’ second investment in the insurance sector.

In an interview on CNBC-TV, Ganesh Ayyar, CEO of MphasiS, said that the company has offered 2-4.5 times its sales figures to acquire Wyde in an all-cash deal, but did not reveal terms of the deal. Ayyar said he believed that the acquisition, which he hopes to close within the next 30 days, will be EBITDA accretive for MphasiS (Ayyar reports that their revenue size hovers at approximately US$30 million with 18% EBITDA in 2010).

Mphasis has retained a focus on insurance, banking and capital markets, and according to analysts, the deal enhances its ability to build BPO services integrated play around this platform. From MphasiS’ perspective, the deal also enables them to engage both mature and emerging markets. From a services perspective, the deal will give Wynsure customers access to additional BPO services.

"Coming on the heels DuckCreek/Accenture, and Sapiens/FIS/IDT, there appears to be a pattern of larger services firms buying smaller companies that give them strong software assets and existing customer relationships,” Matthew Josefowicz, insurance practice lead at Novarica, told Insurance Networking News. “In speaking with some of our Research Council members, larger insurers are more likely to welcome these moves, since they feel more comfortable contracting with larger counterparties rather than with small independent vendors. However, smaller insurers are often concerned that they will lose their 'key client' status as their small vendors become part of a bigger company. All of these acquirers will need to carefully message their go-forward strategies in order to reassure the existing client bases of these formerly-independent vendors."

Wyde’s Wynsure system assets and deployment base is based in the United States, but the company also has significant research and development operations in France. The Wynsure platform includes comprises policy administration, claims and billing solutions for life and annuities, disability, health and P&C lines of insurance.

"This acquisition gives Mphasis a strong core systems asset with a growing market position in both life/annuity and property/casualty in North America, and it gives Wyde deeper pockets and access to additional R&D and implementation talent," notes Josefowicz.

Mphasis reports that it will establish a Wysnure center of excellence in India, which will complement and support Wyde's onsite teams France and North America.