First Derivatives secures majority stake in US software firm

October 20, 2014

First Derivatives, the Newry-based financial technology firm, has agreed a £36 million deal to secure a further 46.47% in high performance database outfit, Kx Systems.

California based Kx Systems makes high performance databases using a technology called kdb+. It is one of the world’s biggest vendors of Big Data and its clients include nine of the ten biggest investments banks such as Goldman Sachs and Morgan Stanley. The firm has recently signed major deals in other markets including oil and gas, pharmaceuticals and utilities.

First Derivatives already held a 20% share in the firm, but the deal sees First Derivatives increase its holding to 65%.

Kx reported revenues of €13.6m and pre-tax profits of €8.8m for last year.

Brian Conlon, First Derivatives CEO, said “We intend to make significant investments in Kx to allow the founders and their team to scale the company whilst staying true to its heritage. Transformational is a term often overused in the technology industry, but in this case I can confidently use it to describe the impact this transaction will have on our collective prospects.”

“Together we look forward to exploiting its capabilities to its full potential as we further penetrate the financial services sector and to build upon the foothold that has been established in other vertical sectors,” Mr Conlon added.

The Kx founders, Arthur Whitney and Janet Lustgarten, will continue to work for the firm, with Janet Lustgarten also expected to join the board of First Derivatives.

She said: “We have been successfully focused on Wall Street for 20 years because of the large data sets they have.

“Now because the internet of things is generating large data sets in other industries, we need to grow to be able to address these new opportunities.

“First Derivatives, with its deep pool of engineering talent and its global footprint, is the ideal partner to help accelerate our growth, scale the company and to bring kdb+ to a wider audience.”

To support the financing of this the deal, First Derivatives has taken out a five year loan of £24m with Bank of Ireland which it says may also be used for “other potential investments”.

The news of the majority stake acquisition follows speculation that the firm could be expanding its premises in Newry into the former Woolworths building on Marcus Square in the city.  A planning application to convert the expansive building into office space has been lodged in the name of Marcus Square Developments Ltd, a firm that lists Chief Executive of First Derivatives, Brian Conlon, as a director.

Although First Derivatives has its headquarters on the Canal Quay in Newry, the announcement in June this year that the company was set to create 484 new jobs, has fuelled rumours that a second premises would be opened to facilitate the new employees.

Local hopes are high that the disused space will be used to house young professionals from First Derivatives, as a major office style facility in the centre of the city would undoubtedly have a positive impact on city trading, footfall and the local economy.