M&A: Citi Targets Hedge Fund Business ; The purchase of BISYS positions the bank to offer more services in North America

Citi announced in May a $1.45 billion deal to purchase outsourcing provider BISYS in a transaction designed to boost the bank's administration and distribution services capabilities for the rapidly growing hedge fund, mutual fund and private equity fund industries.

Citi will combine BISYS Fund Services and Alternative Investment Services-the fourth largest operation in the world-with its own operations to create a powerhouse in the investment services industry with an expanded presence in North America and broader product offering in these areas. At the same time, JC Flowers, a private equity firm, will acquire BISYS' Insurance Services Group and Retirement Services business from Citi.

Neeraj Sahai, global head of securities and fund services at Citi, says the deal will give Citi a stronger North American presence to accompany the bank's global scale and scope. Scale has typically driven these kinds of merger deals, he says. But while scale...