S&P Global’s plans to acquire IHS Markit for $44 billion is sure to face harsher scrutiny from the incoming administration. President-elect Joe Biden has indicated that antitrust enforcement will get tougher, antitrust experts said on Monday. S&P Global and IHS Markit merger will place the company in the top 3 debt ratings and financial data analysis companies.
IHS Markit merger shows market dominance
The data business is a profitable one. S&P’s expertise is in credit ratings, financial markets data, Platts energy data and its famed indices. It has an operating margin of 56 percent.
Markit, in addition to securities pricing, sells oil and gas data as well as information on automobiles and auto components. But 2020 has seen growth fall sharply due to a decrease in auto business and oil prices.
The two companies estimate they can slash about a fifth of their combined overhead costs — at the cost of competition. Refinitiv, the former Thomson Reuters financial data service, was bought off Blackstone by the London Stock Exchange. ICE, another stock market group, bought Ellie Mae and Interactive Data Corporation together at a price of more than $15 billion. Bloomberg remains a private entity controlled by Michael Bloomberg, the former New York City mayor and estimated to be worth more than $50 billion.
Consolidation has become the name of the game in the finance information ecosystems. The top players want to become one-stop windows for financial professionals who rely on the data provided by these companies to make decisions that move billions of dollars.
But the merged company will still lag behind Bloomberg and Refinitiv, according to market research firm Burton-Taylor.
S&P Global has a market value of about $82 billion, and IHS Markit comes with a market capitalization of $37bn; a merger of these two finance rating and data firms would be one of the largest this year. (Editorial credit: David Tran Photo / Shutterstock.com)
Suppliers of financial markets data generated $32 billion of revenue in 2019, according to Burton-Taylor. Bloomberg held the largest market share with 32.8%, followed by Refinitiv at 21.4%. S&P generated 6%, and IHS represented 2% of total revenue.
Antitrust is watching
S&P Global has a market value of about $82 billion, and IHS Markit comes with a market capitalization of $37bn; a merger of these two finance rating and data firms would be one of the largest this year. The takeover would be an all-stock deal, said the Wall Street Journal.
However, the big size of the deal is sure to attract antitrust enforcers’ attention. They will probe areas where the companies competed against each other and their future paths too, antitrust experts said. Regulators will be worried about the oversized market power of a select few data analysis companies. LSE’s deal with Refinitiv faced intense scrutiny in Brussels and the LSE is still negotiating with European Union regulators over its deal for Refinitiv.
“Antitrust could be an issue since both are market data providers,” said Jin Rui Oh, director at United First Partners, an investment and advisory group that specializes in special situations. “That could be a little tricky.”
“I think it’s going to run into really tough scrutiny in the Biden DOJ (Justice Department),” said Seth Bloom of Bloom Strategic Counsel to Reuters. “It would have been better for them if they tried to do this last spring.”
Douglas Peterson, CEO of S&P Global, sounded an optimistic note.
“We don’t believe there’s going to be any regulatory issues which we can’t resolve,” he told Reuters.
