Damir Hot, left, and James Rife, right, are the co-founders of Canalyst.Rafal Gerszak/The Globe and Mail
Canalyst Financial Modeling Corp., a Vancouver capital markets data startup backed by the Canada Pension Plan Investment Board, has been bought by Tegus Inc. for between $400-million and $450-million.
The deal announced Tuesday brings together two fast-growing capital markets tech startups that had each raised between US$90-million and US$100-million in venture capital to go after a market served by giants Bloomberg, Refinitiv, S&P Global and FactSet Research Systems. Other startups in the sector include AlphaSense Inc., which has raised more than US$500-million from financial giants including Goldman Sachs, Bank of America, Morgan Stanley and Barclays; and Yipit LLC, backed by Highland Capital Partners and Carlyle Group.
“We think the combined companies are incredibly disruptive,” said Christian Grunt, a principal with Toronto-based ScaleUp Ventures, an early Canalyst investor. “They’ll be servicing some of the largest investment firms in the world.”
Chicago-based Tegus provides real-time access to more than 40,000 expert interviews and transcripts covering more than 22,000 public and private companies and tools to simplify analyzing disclosures by public companies. It bought BamSEC, which gives users access to SEC filings and earnings transcripts, last year.
Canalyst builds financial models used by investment professionals to track thousands of equities. The seven-year-old company employs more than 100 equity researchers in Vancouver and New York who manually enter data from public company filings into spreadsheets to build and update core financial models customers would otherwise have to produce themselves.
Canalyst delivers its models through online software that its 2,500-plus individual customers at 400 investment firms, banks and corporations put to work in their analyses, saving them hours per stock each year. It puts a premium on accuracy, ensuring data is checked by two or more people plus its own software. Canalyst has doubled revenues in each of the past two years and was generating more than US$15-million in annualized sales early this year, earning it 49th spot in the Financial Times list of The Americas’ 500 Fastest-Growing Companies of 2022.
Canalyst chief executive officer Damir Hot said in an interview that the company, which had raised ample cash on its balance sheet after raising US$70-million early this year, decided to end its days as an independent company because “this was going to be a very rare opportunity” to combine into an even stronger financial entity, as Tegus is also growing by 100 per cent annually and generates free cash flow. “Virtually all of our customers love Tegus whether they’re clients or not, and many Tegus clients are massive Canalyst fans.”
Michael Elnick and his twin brother, co-founder and co-CEO Tom, in a blog post called the Canalyst acquisition “a significant milestone” for their five-year-old company. “It helps us fulfill our vision to create the world’s most powerful and efficient research platform for institutional investors. Customers will now be able to link expert call interviews, models and public financials – all on a single platform.”
Other Canalyst backers include San Francisco’s Dragoneer Investment Group, Texas hedge fund Alta Fox Capital, Boston’s HighSage Ventures and Canada’s ScaleUp and Vanedge Capital.
Terms of the cash-and-stock deal were not disclosed, but a source familiar with the matter shared the valuation with The Globe and Mail. The Globe is not identifying the source as they are not authorized to discuss the matter.
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Sean Silcoff