In a move that shows that data wins hands down, London Stock Exchange confirms to buy Refinitiv, a financial data firm for a whopping $27 billion. The news which has been doing the rounds for a few days affirms LSE’s big data ambitions and how adding Refinitiv to its portfolio gives the company another revenue stream to capitalize on. When completed, the deal would be the biggest between an exchange group and financial data provider.
At its core, Refinitiv is a financial data and trading platform company, widely known for its Eikon terminals, and was carved out of the Thomson Reuters group last year. The deal valued Refinitiv at a whopping $20bn. The $27 billion price tag has created quite a stir in the financial market and can pip LSE to the top, chipping away at the might of longtime rival New York headquartered Bloomberg.
LSE is not the first to bid big on financial data provider. In 2015, Intercontinental Exchange, owner of the NYSE beat out its rival NASDAQ to buy Interactive Data Corp, a provider of bond-market data, for $5.2 billion. Meanwhile, in 2017, NASDAQ bought analytics firm eVestment used by asset managers and investment consultants for $705 million. The move helped NASDAQ to enhance its Global Information Services business, bring more institutional investors on board and build new solutions to support the asset management community.
What LSE Stands To Gain From This Big Ticket Deal
The key question here is — why would an exchange group which operates on a traditional trading business bet big on financial data provider.
Across the globe, exchange groups are consolidating their position in the market as electronic trading takes over the stock and bond market. In order to keep up with the pace and find a new source of revenue, exchange groups are staving off competition with a string of strategic acquisitions.
Traditionally, exchange groups relied on a transaction fees after matching the buyers with sellers. With Refinitiv, LSE hopes to reduce its dependency on transaction-based revenue and will be able to diversify its portfolio with financial data assets.
According to a report from Burton-Taylor International Consulting, if the deal comes through, it will make LSE an $8.4b exchange/market data giant, with a 68% lead over its closest exchange rival (Intercontinental Exchange) and second to Bloomberg in terms of market data revenue.
Last year, the newly carved group out of Thomson Reuters doubled down on analytics, AI and content and Eikon terminals used for banking and wealth customers. Adding one of the world’s largest financial data provider to the portfolio will allow LSE to diversify and tap into new markets.
Analysts forecast further integration of two companies in terms of data, trading platforms and rival Bloomberg, it’s #1 competitor in the field.
The deal will also significantly help LSE surpass Intercontinental Exchange and Deutsche Boerse to become one of the top revenue generating exchange groups. With the acquisition, LSE will gain Refinitiv’s customer base of that includes 40,000 institutions across 190 countries. The move will also bolster LSE’s Information Services segment that would rise from 39% of group revenue to nearly 70%, a report from Burton Taylor hints
Outlook
At a time when the financial market is in a flux, exchange groups are looking for new avenues for revenue. One way to battle out with global exchanges and index providers is to diversify the portfolio with strategic acquisitions which allows traditional exchange groups to grow out of their core business of stock and bond trading. Also, with customers demanding faster access to data, acquisitions like this can give exchange groups a way to compete in the data-driven world.
