In what has been a hectic year of M&A, it looks to be finishing strong with the biggest deal waiting until the close of the year to be announced. In a sweeping strategic move, the financial data giant S&P acquired their rivals IHS Markit, thereby eliminating the competition.
This deal will see S&P Global acquire IHS Markit in full for $44bn in an all-out stock purchase, with existing IHS Markit shareholders being compensated in S&P Global shares. It is of no surprise to see Goldman Sachs be the lead adviser for S&P Global, with Morgan Stanley acting as the lead advisor on behalf of IHS Markit. Additional advisors include Citi and Credit Suisse on behalf of S&P Global whilst Barclays, Jefferies and JPMorgan aid IHS Markit.
Existing IHS Markit shares are to be exchanged for 0.2838 shares of S&P Global, with 67.75% of the combined company being owned by S&P Global shareholders whilst the remaining 33.25% are owned IHS Markit shareholders upon completion, which is claimed to be mid-2021.
S&P Global has also taken on $4.8bn of debt as part of the deal, although it’s unclear regarding specific details of this debt.
This acquisition will also see a slight change of management, with S&P Global CEO Douglas Peterson leading the firms, with IHS Markit CEO Lance Uggla acting as special advisor for when the deal closes. When being interviewed regarding the deal, Uggla has heralded the synergy of the acquisition, highlighting the importance data plays in finance now as investors seek to utilise it to gain an edge over others, specifically mentioning high-frequency traders and high-speed trading algorithms.
It is hoped that with this transaction, financial data can be more efficient than ever, as the two firms merge their resources and scale their operations with the aim of outperforming their other rivals: Bloomberg and Refinitiv. However, with so much market share being absorbed due to this acquisition, industry regulators will be quick to react to any uncertainty raised.
(Source: Yahoo finance)
Investors have been cautious though, evident in the movement of IHS Markit’s share price. After a high of $99.46 on 30th November, it has since fallen to $89.33 as of 11th December, representing a 10.2% fall. Whether this is fear around sweeping industry regulation or investors taking profit remains to be seen, as only time will tell. However, it’s too early to gauge just yet.
It would be rational to expect to see 2021 kick off with more M&A activity, as many companies seek to build on their current operations with the hunger for beaten-down competitors stronger than ever as Covid-19 has ripped through the global economy. With Facebook and Alibaba recently being accused of operating a monopoly, it will be interesting to track how this acquisition closes as we seek to recover from the pandemic as fast as possible.