US-based global financial information provider S&P Global will buy UK-based market research and financial analytics company IHS Markit, in an all-stock deal worth $44bn (£33bn). This is the biggest corporate acquisition of 2020 and S&P Global’s largest acquisition ever.
The deal had been in progress for the past few months, according to an internal memo to employees from IHS Markit’s CEO and Chairman, Lance Uggla. It is expected to close in the latter half of 2021 upon passing checks by antitrust regulators. “The next steps will be to receive regulatory approvals both in the US and the EU, which we expect to take between six to nine months, and receive approval by our respective shareholders,” Mr Uggla stated in the memo.
The transaction brings together two world-class organizations, a unique portfolio of highly complementary assets in attractive markets, and cutting-edge innovation and technology
The terms of the agreement, unanimously approved by the Boards of Directors of both companies, state that each share of IHS Markit common stock will be exchanged for a fixed ratio of 0.2838 shares of S&P Global common stock. Following the sale, current S&P Global shareholders will own about 68% of the combined company while IHS Markit shareholders will have roughly 32%, according to a news release by S&P Global. President and CEO of S&P Global Douglas Peterson will serve as CEO of the combined company, while Mr Uggla will act as special advisor to the company for one year.
“The transaction brings together two world-class organizations, a unique portfolio of highly complementary assets in attractive markets, and cutting-edge innovation and technology capability to accelerate growth and enhance value creation,” the news release further stated.
The deal would allow S&P Global to potentially rival financial information leaders Bloomberg and Refinitiv
Mr Uggla said: “This transaction is a win for both IHS Markit and S&P Global as we leverage our respective strengths in information, data science, research and benchmarks.”
S&P Global and IHS Markit are huge providers of financial information. S&P Global, one of the most prominent names in financial markets, is well-known for its stock market index, credit ratings, and energy analysis, while IHS Markit is big in debt markets, derivatives analytics and corporate research in areas such as transportation, aerospace and trade. The deal would combine the two financial data giants to grant S&P Global a wider array of products and services, allowing it to potentially rival financial information leaders Bloomberg and Refinitiv.
Mr Peterson said: “Through this exciting combination, we are able to better serve our markets and customers by creating new value and insights.”
Much of the data IHS gathers is complex and not easily available, making it valuable for S&P Global. IHS’s Energy segment could be integrated with S&P Global’s own commodity and energy data service, Platts.
We are looking at a billion-dollar wedding, and customers will get stuck with the bill
Jeff Silber, an analyst at BMO Capital Markets, said that S&P Global Platts and IHS’s fixed income pricing business dominate their respective areas.
But some in the industry are cautious about the deal. Claus Thorball, head of data procurement at DanskeBank, said: “By applying the S&P business mindset to the IHS Markit portfolio of services we are looking at a billion-dollar wedding, and customers will get stuck with the bill.” Other data procurement managers have expressed similar qualms over the monopolization of financial data products and services increasing prices. The combined company is expected to face regulatory scrutiny because of its size and the vast amount of data both companies possess.
S&P Global is among a growing number of companies investing in data, which is seen as highly valuable, especially for financial institutions
Global spending on financial market data increased by 6% to $32bn in 2019, according to Burton-Taylor International Consulting. According to Forbes, in 2019 S&P Global’s financial and market information services accounted for about 30% of revenue, while IHS Markit’s financial services was responsible for 40% of revenue. The combined annual revenues of the companies are about $11bn.
This deal showcases the rising occurrence of big data acquisitions, with some headline-grabbing examples being Microsoft’s $26.2bn purchase of LinkedIn in 2016 and Morgan Stanley’s acquisition of E*TRADE for $13 billion earlier this year. S&P Global is among a growing number of companies investing in data, which is seen as highly valuable, especially for financial institutions. S&P Global’s biggest customers. Economists refer to data as a non-rivalrous, non-depleting, regenerative asset. “Information is king,” said Andy Nybo, a director at Burton-Taylor International Consulting. “The value of market data is just becoming more and more evident.”