29 Feb 2008 New Thomson-Reuters Combination Will Command 32% Share of US$23 Billion Market

Implications

The Thomson-Reuters merger approval reduces “the Big 3” financial information players to “the Big 2”. Not only does it dramatically change the market share of the dominant players but it also limits competition and vendor choice for the users of information…at least until a new vendor steps-up to create “the new Big 3″. 

Analysis

My data shows that the global spend for financial information and analysis topped US$23 billion in 2007, with roughly half coming from the Americas and almost 30% occurring in the Fixed Income/Foreign Exchange (FX) Sales & Trading segment.

I estimate that worldwide information and analysis spend by the corporate and financial services sectors grew 4.9% in 2007. Asia led all regions with nearly 8% growth, year on year. Not surprisingly, China was the fastest growing country at 12.9%, followed by India at 11.5%. Fixed Income/FX Sales & Trading, totaling US$6.47 billion globally, is the largest single segment within each major region. While Investment Management is the second largest segment in the Americas and Asia, Equity Sales & Trading holds the number two spot in the Europe, Middle East and Africa region.

Although 2008 will be challenging for the industry, I expect financial information/analysis spend to grow at a rate of just over 6% for the year, to US$24.4 billion. Regulatory changes cascading through countries around the world, coupled with the continued evolution and maturity of the markets in China and India, will drive growth.

Uncertain economic times, particularly in the US, will make 2008 a year of caution for many clients of the information/analysis vendors. Fortunately for data suppliers, uncertain times often increase the importance of high-quality, differentiating content. With a smaller margin for error, and US economic uncertainty generally seen as short rather than long-term, many financial services clients will be less focused on internal contraction and more focused on finding Alpha. Consequently, they’ll continue to invest in premium information and tools.

Even with the credit crunch and pending elections in North America, 2008 looks to be an interesting and exciting year for the industry. Generally, stricter reporting standards and the growing trend for corporations to take a more proactive and direct approach to their investor relations and communications globally, set this up to be a banner year for spend in the Corporate segment.

Moreover, the merger of Thomson and Reuters (which by my calculation gives the new combination a 32% share of this US$23 billion market) will force answers to several interesting questions. Will the new combination seek to maintain a dominant position in the low margin Wealth Management segment? How will the Investext, FirstCall, Multex, Datastream and EcoWin franchises be impacted by the mandated database sale? Which company will step-up alongside Thomson-Reuters and Bloomberg to form “the new Big 3”?

My guess is that IDC will take the first run at joining “the new Big 3”, if they can 1) fill their current strategy void and 2) acquire experienced talent to integrate real-time data with historical/reference data and news. FactSet could also make a run, if they were to 1) find the motivation and 2) find a way to continue to meet their high customer service standards while pursuing new markets.

GLG members may download my 2008 Global Financial Information/Analysis Competitor Market Share Maps and Segment Sizings free of charge by visiting the Research Request page and inputting research sample code FINMARKET2007GLG.