It’s a familiar story: a British start-up devises some neat technology, grows rapidly, looks like it has the potential to go onto bigger and better things – and is then snapped up by one of the big Silicon Valley players.
So a move by RELX, the information and analytics specialist, is interesting because it throws into reverse that scenario.
The company, the 19th biggest in the FTSE 100, is paying £580m for ThreatMetrix, based in San Jose, California, which is a leading player in the “risk-based authentication” sector.
In other words, it has created a database that helps its customers – such as financial institutions, retailers and media outlets – identify quickly the risk of doing business with customers of their own.
According to RELX, ThreatMetrix’s network analyses more than 100 million transactions every day across 35,000 websites.
Once acquired, the business will be merged with RELX’s Risk & Business Analytics division, which trades under the LexisNexis Risk Solutions brand.
Mark Kelsey, chief executive of the division, said: “ThreatMetrix is widely recognised as a leader in the digital identity space.
“Bringing that together with our own strengths in physical identity attributes will give our clients across all forms of commerce and geographies a more reliable, comprehensive approach to fraud identity and risk management while maintaining the privacy and security principles our customers have come to expect.”
The takeover, which is the biggest acquisition by RELX in a decade and its fourth purchase of a business in the San Francisco Bay Area in just two years, looks expensive by some measures.
ThreatMetrix, which is just 12 years old, has only 225 employees and, while it is growing rapidly, its annual revenues are counted in the tens of millions rather than the hundreds.
RELX, a company that in the first half of 2017 reported operating profits of £949m, itself admits that the transaction is not going to move the needle in terms of its earnings.
And yet this business does rather look like being in the right place at the right time.
The number of cyberattacks taking place globally has doubled during the last two years and the way in which these attacks are carried out is evolving.
No longer do fraudsters simply look to use a stolen credit card to make a quick profit.
The bigger prize for them these days is to harvest stolen identity data in a more sophisticated way, using it to set up new accounts with banks or retailers, or take out fake insurance policies.
This is a more laborious process but, over the longer term, generates greater returns for fraudsters.
So this is a business for which demand is going to increase dramatically in future.
ThreatMetrix itself estimates that attacks by ‘bots’ can account for up to 90% of traffic on some retail websites.
This is not only a headache for the retailers themselves, but also for legitimate customers, who face ever-lengthier verification processes to prove that they are not a robot.
It follows that anything capable of reducing the threats, or can help a firm establish that the person with whom they are doing business is who they claim to be, will have a ready market.
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So this deal not only strengthens the position of RELX in a fast-growing sector.
It is yet more proof that a company which, in one of its previous incarnations has owned the Daily and Sunday Mirror and magazines such as Reveille (ask your grandmother), is reinventing itself as a tech and data company operating in some of the raciest segments of the global economy.
Source: Sky