Guidewire Software Inc. will fork over $275 million to acquire Cyence, a software startup that uses data science and risk analytics to help P/C insurers address emerging risks including cyber, reputation and new forms of business interruption.
Plans call for closing the M&A deal in Guidewire’s fiscal second quarter.
Both Guidewire and Cyence CEOs framed the acquisition as a complementary one, though Guidewire saw Cyence as a firm that is very much oriented to the future. (Both are also based in California.)
“While Guidewire has focused on core operations, data management and digital engagement, Cyence applies expertise in data science and machine learning to the modeling needs of insurance product design, pricing and underwriting for 21st century risks,” Guidewire co-founder and CEO Marcus Ryu said in prepared remarks. “As additional actuarial approaches struggle to address the unique characteristics of emerging risks like cyber, Cyence’s next-generation approach will enable insurers to broaden the scope and value of the products their policyholders need.”
Arvind Parthasarathi, Cyence’s co-founder and CEO, noted his company started using its data science engine with cyber risk, due to “the significant demand from the insurance industry on what is an existential threat for their insureds.” He added he sees becoming a part of Guidewire as a way to expand that model greatly to other areas.
“We are excited by the opportunity to power our approach with operational data and policy lifecycle support from Guidewire’s core systems and to join forces with the technology leader serving the P/C insurance industry.”
The deal is worth $275 million, or $265 million net of $10 million cash on hand, subject to customary transaction adjustments. The deal for Cyence will include $140 million in cash and 1.6 million shares of newly-issued Guidewire common stock. Of those total shares, about 260,000 are deferred equity consideration, which depend on achieving certain retention and operating milestones.
Cyence was founded in 2014, employs about 90 people and is based in San Mateo, CA. Guidewire’s presentation on the planned Cyence acquisition noted that the company’s staff includes cloud engineers, data scientists, modelers and P/C experts. It serves more than 30 customers including insurers, reinsurers, brokers, regulators and rating agencies, according to the presentation.
Cyence raised $40 million in financing in 2016, from investors including Dowling Capital Partners, New Enterprise Associates (NEA) and IVP.
Guidewire has expanded through acquisitions in recent years, most recently in February 2017 when it concluded a $160 million acquisition of ISCS, a cloud-computing technology outfit focused on areas including policy administration, underwriting, claims, billing, business intelligence, reinsurance and mobile products.