S&P Merges with IHS Markit: Combining Market Data Businesses in a New Age of Technology

The proposed merger of S&P and IHS Markit creates a combined entity that will be in a better position to challenge the long-standing market data leaders (Bloomberg and Refinitiv) than ever before.  Burton-Taylor’s new report, “S&P Global and the Potential Merger with IHS Markit” (https://burton-taylor.com/spglobal-ihsmarkit-merger/) assesses the impact of this transaction.

On November 30, 2020 S&P Global and IHS Markit announced they have entered into a definitive merger agreement to combine in an all-stock transaction.  The new company’s estimated 2020 share of the industry’s $32 billion market data revenue is 8%, well

S&P’s Key Acquisitions Since 2015

below either of the top two providers, but the complementary nature of their offerings and the analytics-driven strategy of their growth will enable them to penetrate the market like many prior challengers couldn’t. The combined entity is positioned to leverage analytics and technology more aggressively to elevate its data products.  Recent acquisitions SNL Financial, Kensho, Panjiva and 451 Research—all analytics-based businesses—have provided significant value to S&P, while IHS Markit has built its core business on using analytics to create better synergies across its many acquisitions since launching nearly twenty years ago.

The limitless ability of analytics to identify correlations from data is guiding the way our institutions look at the business and is changing the way market data providers build their businesses.  Trading firms now deploy algorithms to buy and sell securities on signals based purely on quantitative analytics, while risk managers and operations professionals rely on analytics to create analytical models that improve the accuracy of measuring company exposure and efficiency of processing, respectively.  Data providers need to shift their value to one where analytics and technology—more than the data itself—drives their business.

I see the direction of the new S&P / IHS Markit as one that is focused on the way data will be valued in the next 10 years and beyond, as opposed to the way it has been valued in the past 30 years.  For instance, S&P has recently enhanced its provision of alternative data through its Global Market Intelligence platform.  Adding IHS Markit’s maritime products, which include ship tracking, port data and information on trade flows will incorporate nicely into the realm of alt data, using analytics to identify predictive signals that are playing a more significant role in modeling investment decisions.  Enabled by S&P’s analytics, this will provide unique alt data capabilities to the combined firm’s clients.

The merger distances S&P / IHS Markit further from the other competitors.  Without significant moves to enhance their businesses, these firms are less able to move quickly to mitigate their risk of loss.  Hence, the combination will promote new M&A activity by competitors. Smaller providers will look to merge or acquire other assets to keep pace with the top three in anticipation of this new entity’s improved scale that can make it harder to expand into new business segments.

In sum, this transaction is a win for both companies and for the users of market data because it offers synergies across heretofore disparate but complementary data sets that are presently untapped.

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Robert Iati is the Director of Burton-Taylor’s Market Data Research and Strategic Consulting businesses.  Burton-Taylor offers unique insight into the Global Market Data Industry. Subscribers to Burton-Taylor’s Market Data research service get access to our library of content including our annual Market Data Benchmark as well as reports covering industry M&A activity and special reports focusing on specific segments within the industry. Visit our newly redesigned website at https://burton-taylor.com/ and contact info@burton-taylor.com for more information on our subscription packages.

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