S&P Global and IHS Markit’s Merger Could Spur More Consolidation. Here’s Who Could Be Next.

S&P Global’s $44 billion buy of

IHS Markit

will likely ramp up mergers in the already consolidating financial data and information services space.

The combination of those two companies creates a financial data provider that rivals Bloomberg and Refinitiv. The transaction is the second-biggest merger of the year, behind China Oil & Gas Pipeline Network’s $49 billion buy of PetroChina’s pipeline assets earlier this year, Dealogic said.

This year, big data providers sought to control the information that’s needed to make trading and investment decisions, said Matthew Epstein, managing partner and founder of Newbold Partners, a boutique fintech-focused investment bank. He pointed to the $11 billion sale of Ellie Mae to Intercontinental Exchange, the owner of the New York Stock Exchange, and

Deutsche Börse’s

agreement to buy 80% of

Institutional Shareholder Services,

a proxy advisor, for $2.3 billion. “Data is a good place to be right now,” he said.

Financial data companies have already been merging. The S&P-IHS merger comes a little more than a year since the

London Stock Exchange

offered to buy Refinitiv for $27 billion in July 2019. That deal occurred 10 months after Blackstone (ticker: BX) bought a majority stake in the financial and risk operations of Thomas Reuters to create Refinitiv.

Peter Heckmann, a senior research analyst at D.A. Davidson, said the S&P-IHS deal could cause other financial data and information services companies to consider mergers as a way to build scale. This would be similar to


(FISV) $22 billion buy of First Data in 2019 that set off a wave of consolidation in the payments sector. Last year,

Fidelity National Information Services

(FIS) ended up acquiring WorldPay for $34 billion and Global Payments bought TSYS for $21.5 billion.

FactSet Research Systems




Dun & Bradstreet

(DNB) and


(MORN) could consider mergers, Heckmann said.

The most likely to respond to the competitive threat is FactSet, bankers said. The Norwalk, Conn., company provides financial data and portfolio analytics to the investment community, including companies like Dow Jones. FactSet’s workstations aggregate data from around 220 suppliers, 115 new sources and 85 exchanges, PitchBook said.

“Players like FactSet might have to do bigger deals or be bought,” one of the bankers said.

FactSet ended its fiscal 2020 with $600 million in cash and investments on top of $600 million in debt, Heckmann said, who maintained a neutral rating and a $288 price target on the stock. The company has made two dozen acquisitions in the last 20 years including its buy of TruVue Labs in October. With its solid balance sheet, FactSet would be well positioned to do more mergers and acquisitions, possibly up to $4 billion in value, he said. “That would be manageable,” Heckmann told Barron’s.

FactSet’s stock has rebounded nearly 46% since hitting a low of $231.36 in March. Shares were trading around $336 Wednesday.

Some think FactSet will seek out a merger with MSCI, which offers equity, fixed income and hedge fund indexes. A combination would expand MSCI’s distribution while FactSet would gain a partner that is a leading independent provider of indexes with a growing ESG business, Newbold’s Epstein said. A FactSet-MSCI merger would create a diversified capital markets data vendor that targets the public markets and the alternative asset classes with a strong indexes business and an array of portfolio construction tools, he said. Such a merger “makes all the sense in the world,” Epstein said.

FactSet declined to comment and MSCI did not return messages for comment.

MSCI, with a $34.4 billion market cap, is trading at a high valuation, 32 times earnings before interest, taxes, depreciation, and amortization, or Ebitda. This makes it more of an acquirer than a target, a second banker said. MSCI’s stock has jumped 62% from a low of $257.60 in March. Shares changed hands Wednesday around $416.

“MSCI is the only independent index provider left. It should trade at a premium,” Epstein said.

Epstein thinks Verisk Analytics (VRSK) should also make the list of companies that might seek out a partner. Verisk is a data analytics and risk assessment firm with a $31.9 billion market cap. The stock is up nearly 43% from hitting a low of $137.28 in March. Shares were trading at $197 Wednesday.

Executives for Verisk did not return messages for comment.

One company that is likely not a merger candidate is Morningstar (MORN), bankers said. Shares of the data provider have nearly doubled since March and were trading at $202 Wednesday. Joe Mansueto, who is Morningstar’s executive chairman and founder, owns roughly 46% of the company. That means he can do whatever he wants with Morningstar and a sale is likely not part of his plans.

Executives for Morningstar did not return messages for comment.

The 179-year old Dun & Bradstreet could be in play. The business analytics company went public for a second time in July, raising $1.7 billion. Dun’s stock has remained above its $22 IPO price, trading Wednesday around $27. Epstein thinks Dun would make a smart acquisition for RELX, the U.K. information and analytics company. RELX makes about 10 to 20 acquisitions a year but they tend to be small. RELX has made 10 acquisitions during the first nine months of 2020, valued at £821 million ($1.1 billion). Dun & Bradstreet, by comparison, has an $11.37 billion market cap.

“We don’t comment on market rumours,” a RELX spokesman said.

Executives for Dun & Bradstreet did not return messages for comment.

Write to Luisa Beltran at [email protected]

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