Allen T. Cheng

With more than 70 clients, including eight of the top 10 bulge bracket investment banks, and revenues topping $50 million annually, London-based research outsourcing firm Copal Partners could have easily succeeded in a public listing.

Instead, Chief Executive Officer Rishi Khosla recently decided to partner with one of its clients, Moody’s Corp., by selling over 50 percent of the company to the New York–based financial ratings agency. Khosla describes the share sale as an upgrade in Copal’s brand recognition. “Moodys is a global brand,” Khosla says, refusing to divulge the sale price or Moody’s exact shareholding after the sale, which was a pure cash transaction and occurred in mid-November. “We see this as a very positive move for Copal. Our clients see this as very positive move.”

Moody’s executives weren’t available for comment, but the deal puts Copal at the forefront of helping Moody’s to strengthen its Moody’s Analytics services, according to a company press release, especially in helping institutional clients better manage risk. “Copal is highly regarded in the global financial services industry as a leader in high-quality research and analytical services for bankers, financial analysts and institutional investors,” the president of Moody’s Analytics, Mark Almeida, said in a statement.

The acquisition complements the broad array of research, data, software and education services offered by Moody’s Analytics, the company says. Michael Adler, a New York–based spokesman for Moody’s, also refused to divulge the transaction price.

With expertise in a wide range of disciplines, including financial modeling, industry and company research, capital structure analysis and market surveys, Copal deploys a flexible staffing model to meet the specific requirements of its customers, according to Moody’s.

Copal, which employs 1,300 people, including many analysts in offices in New York, London, Dubai, Beijing, New Delhi, Hong Kong and Buenos Aires, made a name for itself in the financial research industry. In October 2010, Groupe Société Generale surprised the markets by announcing that it was handing equity analysis of 200 global companies for its private wealth clients to Copal, substantially strengthening the capabilities of its team of 10 in-house analysts.

The reports, which were co-branded as reports by Société Generale and Copal Partners, was a coup for Copal: It’s the first time that its reports were no longer produced under the name of a client and also a first in the financial industry in which a global investment bank marketed outsourced equity reports.

Founded in 2002, Copal has grown rapidly in the past few years at a time when major financial institutions laid off analysts by the thousands and trimmed back to cut costs in the aftermath of the global financial crisis.

Moody’s purchase of a majority stake in Copal dilutes the shares of Bank of America Merrill Lynch, Citigroup and Deutsche Bank, three major clients who also were shareholders, from a collective 20 percent to less than 10 percent.

Copal’s chairman is Andrew Melnick, who from 2002 to 2004 was co-director of the global investment research at Goldman Sachs and prior to joining Goldman was director of global securities and economics research at Merrill Lynch & Co.

Copal sits at the higher value-added end of the financial outsourcing industry, which research firm Celent estimates to be worth in excess of $7 billion in revenues in 2010 and consists of 50 to 60 firms, many of which are based India and provide traditional back-office outsourcing services to global financiers. Copal is among a handful that specializes in helping clients conduct the entire range of investment research, from time-intensive data mining and analytics all the way to penning entire reports under the guidance of a lead analyst at a client firm.

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