30 May 2018 Addressable Market Expansion, or Simply “Smoke and Mirrors”?

Last week, IHS Markit announced its plan to acquire Ipreo for $1.855 billion through bank financing, increasing the companies pro forma bank leverage above target to 3.6x. The company aims to create cross-selling opportunities for IHS Markit and Ipreo as well as increase IHS Markit’s addressable market within the global capital markets.

At end of year 2017, IHS Markit held 1.55% market share of the Financial Market Data Industry and currently ranks eighth on the list behind industry giants such as Bloomberg and Thomson Reuters. The majority of IHS Markit’s user base comes from Risk & Compliance with its largest segment being Investment Management followed by Commodities & Energy (through their OPIS business).

Ipreo currently provides solutions and services within private and public capital markets as well as non-financial companies. Their largest user base includes ~100,000 sell-side users, with the company also serving ~25,000 private capital markets users.

Both IHS Markit and Ipreo have been aggressive in their acquisitions and partnerships over the past decade, attempting to expand their products/solutions and user base. The timeline below shows IHS Markit’s acquisitions and divestitures over the past six years and it is clear their focus has been on technology and products that will create one-stop solutions for their current users.

With the company’s previous acquisition history to help maintain their 5.2% five-year CAGR, it makes sense they would look to acquire Ipreo, a firm growing at a double-digit pace…

Does the acquisition of Ipreo legitimately increase the addressable market for IHS Markit?

Does the acquisition of Ipreo result in realistic cross-selling opportunities?

Does the acquisition of Ipreo content and capabilities fundamentally improve the ability of IHS Markit to compete?

These questions are addressed in Burton-Taylor’s most recent report – IHS Markit’s acquisition of Ipreo.