Experian, the global information solutions company, has announced that it has agreed to acquire an initial 65% stake in Serasa, the market leading credit bureau in Brazil and operator of the fourth largest credit bureau in the world, from a consortium of Brazilian banks. The stake will increase to 70% over the next six months. The purchase price for the initial stake is R$2.32bn ($1.2bn), inclusive of transaction costs, net of cash.  The acquisition will be funded from Experian’s existing credit facilities. The transaction, which is expected to be earnings neutral in the first full fiscal year of ownership and earnings enhancing thereafter, was completed by the end of June. Serasa 2006 revenues were US$ 313 million with an EBIT of US$ 71 million. EXPERIAN – SERASA:  Mr. Don Robert, Experian’s CEO lamented not too long ago in an interview that Experian usually spends between US$ 600 – 700 million on acquisitions per year.  Nevertheless last year he could only spend US$ 82 million due to lack of suitable targets.   Well, this year he made up for it by spending US$ 1.2 billion for a 65% equity stake in the Brazilian Credit Bureau Serasa.Serasa was courted by many suitors for years and always played hard to get.  To convince shareholders and management to sell is a major coup.  With this acquisition Experian increased its geographic diversity by entering the world’s forth largest credit bureau market, thus further consolidating its position credit information, from 44% to 49% of its product portfolio.  Most notably is the fact that Experian managed to acquire approximately US$ 125 million in commercial credit information revenue. Once Experian adds BizSource to Serasa’s micro and small business market segment it may lead to much faster growth. 

Experian is busy elsewhere to grow its commercial credit information business, either through acquisitions or aggressive business development such as BizSource.    BizSource undoubtedly will accelerate Experian’s b2b revenue growth in the US, because like in Brazil, small businesses make up more than 98% of the business universe.  Unique data sources of consumer data, business data, and analytics, coupled with the latest search engine technology are a combination hard to beat.

Given the fast pace of acquisitions and product development Experian will become a serous threat to D&B’s domain in commercial credit information within the next five years.

BIIA Newsletter June – 2007 Issue