With a goal of expanding its payments expertise into broader financial services technology consulting and advisory services, as well as taking a well-known U.S. brand global, MasterCard Advisors announced last week it would acquire research and consulting firm TowerGroup from Reuters. MasterCard Advisors, a global professional services organization, is a subsidiary of card and payments organization MasterCard International.
TowerGroup will retain its name and will be operated as a separate business within MasterCard; it will continue to be based in Needham, Mass. In conjunction with the acquisition, Karen Cone, formerly the MasterCard Advisors global practice leader for research, and a former Gartner, Inc., executive, was named president and CEO of TowerGroup. Mark Sievewright, president and CEO of TowerGroup for the past four years, will be involved in the transition and then will leave to pursue new opportunities. TowerGroup analysts will continue in their current positions and areas of focus, according to Cone.
Additionally, Purchase Street Research, a MasterCard unit launched in 2003 that is focused exclusively on the payments industry, will eventually be realigned under the TowerGroup umbrella. "Purchase Street Research and TowerGroup will work together, to provide clients with unsurpassed advisory research," reports Ken Mathis, chief growth officer for MasterCard Advisors.
The TowerGroup acquisition will enable MasterCard Advisors to leverage its "payments expertise across financial services," explains Mathis. Adds Cone, "When MasterCard Advisors was first launched as a consulting and professional services business a little over a year ago," it was a response to business clients' need not only for consulting services, but also for "independent research, advice and analytical positions." When it became known that Reuters wanted to divest the consultancy, she relates, MasterCard Advisors' management concluded, "What a great way to leapfrog into this business. It would take us a long time to grow to anywhere near [the TowerGroup] level."
Another priority will be to expand TowerGroup's presence outside of North America, Cone reports. "We want to expand our influence on a global scale," she says. "We will take advantage of the global reach that MasterCard Advisors has today."
In response to questions about TowerGroup's ability to maintain independence and objectivity, at least in terms of its coverage of the global payments industry, Cone, Sievewright and Mathis each acknowledge that this is of paramount importance to clients, and suggest emphatically that exactly this had been accomplished under TowerGroup's prior ownership by Reuters. According to Sievewright, "We've been a Reuters company since 1999, and have commented extensively on the securities and capital markets space, and have been able to comment directly on the industry, Reuters products and services and strategy. For the analyst team, there really is no change in terms of how they go about their business."
As for how MasterCard Advisors might try to position and differentiate TowerGroup in the competitive financial technology analysis/advisory business, Sievewright notes that "one of the unique facets [of TowerGroup] is the in-depth industry expertise the analyst community has. Many TowerGroup analysts are hired directly from the industry; they have an average of 17 years of direct financial services experience. That literally is unmatched in the industry."
Another growth opportunity has to do with TowerGroup's insurance practice. Although it has only been in the past couple of years that this practice had visibility comparable to the more established practices in securities and banking, it is now one of the fastest-growing parts of TowerGroup's business, according to Cone. "The insurance practice is relatively new in TowerGroup. We will be doing more with the insurance practice and expanding that." Adds Sievewright, "It's one of the smaller practices, but its growth last year outgrew our expectations, and it's rivaling the more established practices."
Elaborating on the opportunities, Cone adds, "The insurance business is expanding into all kinds of new services that overlap with services that traditionally used to be in other industries and organizations; it's the same for brokerage. A lot of business executives, as well as IT executives [are asking,] 'Where are the threats, what's going to hit me that I'm going to need to know about, to ride that wave or protect myself?'"
Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio