Orion Advisor Solutions has acquired HiddenLevers, a software company focused on analyzing the risks of investment portfolios, with plans to bundle their services, help it grow, and face competitors like BlackRock’s Aladdin and MSCI’s RiskMetrics.
The companies announced the acquisition Tuesday morning. HiddenLevers co-founders Raj Udeshi and Praveen Ghanta, as well as 23 employees, plan to join Orion. Udeshi and Ghanta, who bootstrapped the company in 2009, will also be part of Orion’s leadership team. Terms of the deal were not disclosed.
Orion, a technology company whose portfolio management, reporting, and other services are used by 2,200 advisory firms, recently noticed more of its customers were using HiddenLevers, Orion Founder and CEO Eric Clarke told RIA Intel. Meanwhile, HiddenLevers, which uses millions of data points to stress-test investment portfolios and propose changes, hired an investment bank last fall and began a strategic review.
“We didn’t need to do a deal" but one made sense given where both companies are at this moment, Udeshi said.
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HiddenLevers has been profitable since 2012. But companies like it were demanding handsome multiples and the co-founders didn’t want to keep holding onto any “unicorn dreams” and fail to make the best decision. “What we really saw was that unique opportunity to help us scale,” Ghanta said.
The deal with Orion will allow HiddenLevers to hire more employees, continue to innovate at the pace it has, and keep its name. The executives agreed the name has become recognizable and adds value. “To throw that brand away would be a silly idea and Eric got that,” Udeshi said.
Longtime partners, Orion and HiddenLevers have integrated their services over the years. Now, customers who use both HiddenLevers and Orion’s other services will get a discount, Clarke said.
HiddenLevers will also help bolster some of Orion’s other services, including its business intelligence and compliance solutions. For example, in addition to helping advisors analyze the risk to each client portfolio, HiddenLevers can help executives analyze the portfolios across an entire wealth management business and share insights into revenue and advisor performance.
The companies share the same philosophies on product development and enthusiasm for serving RIAs, the fastest growing segment of wealth managers and the future of the industry, according to executives. The deal was an obvious cultural fit, which might not have been the case with other potential buyers.
Other companies, including asset managers, were interested in HiddenLevers, its co-founders said. But the founders were concerned about what might happen to it after a sale.
Part of HiddenLevers' success is due to its nimbleness. It’s capable of developing models and delivering new risk analysis faster than competitors, its executives claim. Last year, while pharmaceutical companies raced to develop vaccines, HiddenLevers was working on its software to help investors determine what impact different vaccination timelines might have on the global economy and, ultimately, portfolios.
Current and prospective clients appreciate that speed and HiddenLevers says it is competing with, and sometimes winning against, BlackRock’s Aladdin, MSCI’s RiskMetrics, FactSet, and other risk analysis tools.
Wealth managers also like HiddenLevers because of its visual representations designed for "non-quants” or clients and users that aren't portfolio managers typically using risk management software like it and others.
The deal with Orion will only make it more competitive, according to executives. “I’m confident that Orion will empower the innovation coming out of our idea lab, as opposed to boxing us into one thing we do well and then hammering the P&L,” Udeshi said.
Orion will also leverage its experience with enterprise business relationships to help sell HiddenLevers to more RIAs and other investors.
“Now we have someone that can spread the gospel more loudly, with a bigger bull horn,” Udeshi said.
HiddenLevers is the latest of many acquisitions by Orion, which has been adding different types of companies in an effort to become an “end-to-end wealthtech powerhouse.” Last summer, Genstar Capital purchased a stake in Orion to merge it with Brinker Capital, one of the biggest turnkey asset management platforms, or TAMPs, with $24.5 billion under management. That deal kicked off a flurry of activity in the TAMP market.
Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.