Acquisition Poised to Bolster GCS's Presence in the Credit Scoring Marketplace

Investment banker Zenkel Schoenfeld LLC this week announced plans to acquire Global Credit Services (GCS), a boutique financial services firm and provider of Internet-based business credit information and credit risk management software.

Zenkel Schoenfeld expects the acquisition will help further its growth in the credit-scoring marketplace. The company anticipates the growth will be led by GCS's Premium Insight service, which provides credit ratings, as well as its new ARMZ credit scoring product (its latest version launched last November). The deal is expected to close next month.

Zenkel Schoenfeld partners Lester Schoenfeld and Dorothy Serdenis will take active roles in the new company. Schoenfeld will serve as chairman of the board, while Serdenis will become the chief operating officer. Gerry Delisle, GCS's co-founder, will remain with the company as chief executive officer.

This should be a worthwhile endeavor for all parties. Zenkel Schoenfeld will instantly increase its stature in the credit scoring space, while GCS will gain the capital it needs to grow in such a competitive marketplace. Look for both Premium Insight and ARMZ to become more robust offerings in this space as the newly combined company begins to build the foundation for a solid future.

Reed-Elsevier: Working the Workflow

In two separate announcements today, Reed- Elsevier has unveiled a sweeping and profound change in direction for the company: it is acquiring publicly-held ChoicePoint for an impressive 4.2 times revenue and 14 times earnings, and plans to divest its Reed Business Information unit.

What's going on?

In a nutshell, Reed is making a huge statement that the future is now, and the future is all about infocommerce: the integration of high value content, enhanced by software, into customer business processes and workflow.

ChoicePoint, a 1997 spin-off of credit reporting agency Equifax, is a public records aggregator much like Reed Elsevier unit LexisNexis. On that basis alone, the acquisition makes perfect sense. But also like LexisNexis, ChoicePoint has been adding value to this mass of often mundane content by mixing, matching and merging this data, then powering it with software so that it quickly and efficiently addresses specific business needs. ChoicePoint has services that do employee background checks, scan for potential deadbeat tenants, spot healthcare fraud, insurance risk management, you name it. The business is a glove fit with the existing Risk Management business of LexisNexis. ChoicePoint also does a lot of business with the government, particularly in the law enforcement arena, and that means it will substantially leverage Reed-Elsevier's 2004 acquisition of Seisent, one of the largest repositories of public information.

Any way you come at this, the fit is sublime and the scale and reach of the combined organization will be huge, so much so that there will likely be heavy regulatory scrutiny of this deal. But the strategic handwriting is on the wall: Reed-Elsevier is increasingly placing its bets on its LexisNexis unit, and within that unit, its Risk Management Division. And while risk management sounds like a hum-drum market in which to be seeking growth, it is a market that is inherently data-intensive, values sophisticated content/software for risk analytics, and by its nature will allow Reed-Elsevier to tie itself in to the operational plumbing of its customers. And that's the holy grail for data publishers who understand where this industry is headed: those who can deeply embed themselves in the businesses of their customers know that they won't -- and in many cases can't -- ever be asked to leave. Welcome to the Nirvana of the lifetime customer.

And while acquiring ChoicePoint, Reed- Elsevier also plans to shed its Reed Business Information unit, (although not its Reed Exhibitions unit, a seemingly financially- driven decision and not a strategic one). Despite such powerful brands as Variety and Publishers' Weekly, and impressive rates of online growth, Reed Business is struggling, like so many trade magazine publishers, to offset declines in its print revenues, where so much of its business still resides. Indeed, in its press release, you can sense the relief of Reed-Elsevier as it frees itself of the "inherent cyclicality" of advertising-based revenue streams.

Overall, this evolution mirrors in many ways the evolution that's been taking place at Thomson, although Thomson saw the digital workflow future and started acting on it a number of years before Reed. Regardless of timing, both these companies are looking stronger for these major shifts, and the power and value of workflow-integrated data products is more clear and certain than ever before.

Labels: choicepoint, lexisnexis, reed-elsevier, seisent

Morningstar Launches Build on Winning Formula

Independent investment research provider Morningstar last week launched the Morningstar Rating for hedge funds, the Morningstar 1000 Hedge Fund Index and 17 indexes based on the Morningstar Hedge Fund Categories.

The new rating system for hedge funds is similar to the Morningstar Rating for mutual funds, according to the company. It uses a scale of one-to-five stars so similar numbers of hedge funds receive one and five stars. Morningstar categorizes the hedge funds into one of 17 Morningstar Categories, such as "convertible arbitrage" or "emerging market equity," according to a series of quantitative and qualitative measures. Morningstar then ranks and rates the hedge funds against peers in the Morningstar Categories based on risk-adjusted return.

Morningstar's database contains approximately 7,700 direct hedge funds and funds of hedge funds. There are 3,300 funds of hedge funds in the database.

The new Hedge Fund Index contains the top 90 percent of eligible assets in Morningstar's hedge fund database. The index is updated daily for the previous month-end, rebalanced monthly and reconstituted semi-annually. Morningstar also launched the 17 category indexes based on the company's strategy-specific classification system for hedge funds.

This is certainly a very logical next move for Morningstar. There is undoubtedly a strong need for such content; and the financial ratings giant already has a great model (the Morningstar Rating for mutual funds) to follow.

It's usually a good idea to take a winning formula and run with it. That's just what Morningstar did with this particular offering. Of course, it's necessary to do your research first in order to confirm there is enough customer interest to make a new offering viable. If Morningstar can identify other ways in which to build on this model, it probably will.

Do You Palau?

Whenever I register as a website user or make a purchase online I encounter a form that invariably has a field called "state" and a pick list of choices. Since I live in Pennsylvania, to speed my way through this field, I type the letter "P" to move myself to the correct position in the pick list. I always expect to get to "Pennsylvania" because both alphabetically and by postal abbreviation, it is the first U.S. state starting with "P."

At least 40% of the time, however, instead of getting "Pennsylvania" as a result, I get "Palau," a nation in the Pacific Ocean with a total population of about 20,000. This means I have to spend extra time fumbling with the pick list to correctly enter "Pennsylvania" in the state field.

Who cares? Well first of all, Palau isn't a U.S. state. It hasn't even been a U.S. Trust Territory since 1978. But worse than engaging in geopolitical incorrectness, sites that include Palau in their pick list of state choices are making me work that much harder on the inherently annoying task of registering, i.e. providing the same information over and over again. On top of that, these companies are polluting their own databases, complicating all their internal data processing activities.

So why does Palau appear so often on state pick lists? Because marketers and product managers continue to cede too much of the website design to programmers. And one thing I can assure you of about programmers: data entry of any kind is anathema to them. That means that every time they are faced with typing a list, they'll opt to grab it from another site, copying and pasting for speed and convenience, and propagating errors like this as they go. But the blame can't be placed entirely on the programmers. These errors persist because nobody is checking their work.

It's a small error in the greater scheme of things to be sure. But it's also a small amount of work to make sure that errors like this don't occur. It is the job of programmers to develop applications and make certain they work. It is the job of marketers to make sure the applications work well. And this is just one mildly amusing bit of proof that attention to detail is still lacking. And considering that our collective futures are online, that's not good. So mind your P's and Q's.

Labels: ecommerce, palau, picklist, site design, site registration

Onvia Poised to Become Stronger Player in Construction Information Market

Sales intelligence provider Onvia this week announced that it has expanded its offerings in the construction industry to include hard-to-find information about emerging commercial and residential projects nationwide.

According to Onvia, this new service will eliminate the need for customers to manually search public records for potential projects. The service is geared toward architects, engineers, contractors and suppliers and it will notify them about early-stage projects.

Onvia also offers information about government purchasing activity, but notes that these commercial and residential projects are not highly publicized when they begin.

It sounds like Onvia is going to use an automated system to collect the information for the new service (by scanning permit filings, etc.). But regardless of the company's approach, this could really provide some serious competition for Hanley Wood Market Intelligence, which provides real estate research and analysis for the residential market. It could even give data providers like Reed Construction Data and F.W. Dodge (McGraw-Hill Construction) something to worry about.

One difference is that these companies actually have people in the field conducting the research. But how much of a difference that will make in the long run is in the hands of the customers. If Onvia can present the information in a more efficient manner, which is so crucial in the dissemination of this type of data, the company will most certainly earn a top spot in the marketplace.