COSTA MESA, CA ─ October 1, 2013 ─ Experian, the global information services company, is pleased to announce that it has signed a definitive agreement to acquire The 41st Parameter, Inc, or “41st Parameter”, a leading provider of fraud detection services, based in the US. The aggregate purchase price for all outstanding stock, stock options and warrants of 41st Parameter is US $324m, of which US $14m is subject to limited, two-year earn-out provisions, and will be funded from Experian’s existing cash resources. The transaction is subject to customary closing conditions.
Incorporated in 2004, 41st Parameter products use device identification to prevent fraud. Clients use 41st Parameter’s products to enable consumers to complete transactions on the web quickly and securely, reducing fraud losses while simultaneously authenticating consumers with minimal intrusion. 41st Parameter’s products are deployed in a variety of ways, for example to detect fraudulent activity when a new account is opened, to determine the risk associated with Card Not Present online transactions or to prevent fraudsters from taking over account balances. Clients also use 41st Parameter products to enhance internal operational efficiency by reducing the number of false detections of potential fraud. Its clients include financial institutions, travel web sites, eCommerce merchants and customers in the digital media segment.
The acquisition of 41st Parameter increases Experian’s presence in the fraud prevention market, and complements Experian’s existing activities in fraud detection and online authentication. It extends Experian’s presence into web fraud transaction protection, one of the fastest growing fraud segments. Growth in this market is being driven by the proliferation of devices around the world, the growth in eCommerce and mobile volumes and an increasing requirement for businesses to service their customers across multiple devices.
Experian believes there is considerable opportunity to drive adoption rates of 41st Parameter’s products through cross-selling to Experian’s existing client base, by leveraging Experian’s wide geographic footprint and through the combination of device identification into Experian’s existing identity management products.
41st Parameter has an attractive financial model, with a high proportion of recurring revenue. Revenues are licence-based and are recognised over the life of the contract, which is typically 2-3 years in duration. Client renewal rates exceed 95%. For the year ending 31 December 2013, Experian expects 41st Parameter to deliver approximately US$26m of revenue, of which over 95% is booked and contracted.
Since incorporation, 41st Parameter has experienced strong growth, with compound annual growth in revenue over the past two years of over 40%. The contracted nature of the business model provides good forward visibility, and Experian expects to sustain growth in line with historic rates over the next twelve months. The acquisition is expected to be broadly EPS neutral in the year ending 31 March 2014.