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Transactions

October 2005
Chicago, Illinois
has been acquired by
Norwalk, Connecticut


Background

Doug Wheeler leveraged his background as a portfolio manager to found Derivative Solutions. In a few years the company had become one of the leading providers of fixed-income analytics, portfolio-management and risk- management solutions to financial institutions. The company was growing rapidly and quite profitable. The next step was to take the Company international and expand the product line. However, the complexity and time involved with these activities along with the requirement to build more infrastructure held little appeal for him. Doug’s preference was to see if there were a strategic partner that would value the Company he had built, and provide for a larger role for him and his team. He engaged M&A to provide strategic and financial advice.



Overview

On August 2, 2005, Derivative Solutions, Inc was acquired by FactSet Research Systems, Inc. (NYSE: FDS) a leading provider of global financial and economic information. The purchase price was approximately $53 million, consisting of $42.5 million in cash and approximately $10.5 million in stock. This represented approximately 5.3 times Derivative Solutions revenue for 2004.

The transaction has allowed Derivative Solutions team to expand their product line and to expand internationally, while at the same time relieving Doug Wheeler of some of the administrative burdens that come with being CEO of an independent Company. It also provided significant liquidity to the founders. Doug and his team now have broad fixed-income related responsibilities within FactSet. The acquisition also broadened FactSet’s capabilities in the area of analysis of fixed-income securities.

M&A Role

M&A was the exclusive strategic and financial advisor to Derivative Solutions.

Press

FactSet Research Systems Acquires Derivative Solutions

August 02, 2005

FactSet Research Systems Inc. Acquires Derivative Solutions
Tuesday August 2, 7:00am ET
Acquired Product Suite Complements FactSet's Fixed Income Reference Data and Portfolio Analytics Services

NORWALK, Conn.--(BUSINESS WIRE)--Aug. 2, 2005--FactSet Research Systems Inc. (NYSE: FDS - News), a major supplier of computer-based financial and economic data to the investment community, today announced that it has acquired all of the outstanding capital stock of Derivative Solutions Inc. FactSet paid consideration of $42.5 million in cash and 305,748 shares of FactSet common stock. Revenues for Derivative Solutions were approximately $10 million for the year ended December 31, 2004.
Based in Chicago, Derivative Solutions provides fixed income analytics, portfolio management and risk management solutions to major banks, insurance companies, investment managers, dealers and other financial institutions. Founded in 1991, Derivative Solutions is known as a market leader in serving structured products specialists.

"Derivative Solutions has positioned itself as a leading edge provider of analytics to fixed income market participants," said Philip Hadley, FactSet's CEO. "Its suite of products, along with its team of highly quantitative fixed income experts, will significantly enhance our portfolio analytics and security modeling capabilities and complement our current offerings for equity investment professionals."

"We are excited about the opportunity to join forces with FactSet and offer our existing and future clients the combined expertise of both companies," said Douglas Wheeler, the founder and CEO of Derivative Solutions. "FactSet's service, with its premium position in the global money management and brokerage community, as well as its extensive available content and advanced software delivery, is the perfect platform to enhance service to our clients and expand the market penetration of our fixed income analytics."

About FactSet

FactSet Research Systems Inc. (http://www.factset.com) is a leading provider of global financial and economic information, including fundamental data on tens of thousands of companies worldwide. Combining more than 200 databases into its own dedicated online service, the Company also provides the tools to download, combine and manipulate the data for investment analysis.

The Company, headquartered in Norwalk, Connecticut, was formed in 1978 and now conducts operations, along with its affiliates, from more than twenty-two locations worldwide, including Boston, New York, Chicago, San Mateo, London, Frankfurt, Paris, Tokyo, Hong Kong and Sydney.

About Derivative Solutions

Derivative Solutions Inc. is a leading provider of analytics and portfolio management software to financial institutions trading and investing in bond markets. Since 1991, Derivative Solutions products have provided tools necessary for the proper valuation and risk management of fixed income securities including CMOs, ABS, CMBS, CDOs, MBS, treasury, agency, corporate, municipal and derivative instruments. Traders, analysts, portfolio managers and risk managers at leading Wall Street institutions, as well as regional dealers, banks, insurance companies, investment managers, and other financial market participants use the Derivative Solutions suite of products for bond trading, portfolio management, risk management, hedging and performance attribution.

About Marlin & Associates

Marlin & Associates (M&A) initiated this transaction and acted as exclusive advisor to Derivative Solutions. M&A is a specialized investment banking advisory and consulting firm providing transaction advice and services to middle-market firms in the media, technology, information and business services sectors. The firm is based in New York City and Washington DC.

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