Company / Analytics

Analytics, 04 December 2020

What to know about S&P Global and IHS Markit deal?

Data giant S&P Global has agreed to buy IHS Markit in a deal worth $44 billion, in what will be the biggest merger of the year. The merger makes creates a heavyweight in the increasingly competitive financial information market and is expected to close in the second half of 2021, after anti-trust regulatory reviews. Here is what is investors should know.

The importance of big data in the financial markets has been growing, governed by information-hungry trading algorithms. In addition to the S&P Global – HIS merger, other data firm related mergers include the ongoing acquisition of Refinitiv by the London Stock Exchange.

What investors should know about S&P Global – HIS deal?

How is the merger structured?

Why is the merger important?

The deal puts pressure on rivals such as Bloomberg LP, Intercontinental Exchange Inc, Factset Research Systems Inc, and Moody’s Corp to pursue similar moves. While not all of them provide the same financial data, most of them chase the same clients, from investment bankers and traders to corporate executives and treasurers.

The London Stock Exchange is in the final stage of trying to win clearance for its planned $27 billion acquisition of data provider Refinitiv, which has been through a long review process by the European Union’s competition commissioner. Refinitiv was carved out of Thomson Reuters by private equity giant Blackstone in 2018 when it bought a 55% stake in the business in its biggest bet since the 2008 financial crisis. Thomson Reuters, the parent company of Reuters News, retains a 45% holding in the business.

S&P Global is a distant No. 3 by annual revenue behind Bloomberg and Refinitiv, according to market research firm Burton-Taylor. While the acquisition of IHS Markit, the No. 8 player, would not change that ranking, it would accelerate S&P Global’s growth.

The deal will combine S&P Global’s credit ratings, market intelligence businesses, and stock and energy benchmarks with IHS Markit’s fixed income benchmarks and indices, bond pricing and reference data, and information on the natural resources, automotive and engineering sectors. It will enable the distribution of IHS Markit products and services to S&P Global’s 1 million desktop users.

The companies said the merger will generate annual free cash flow exceeding $5 billion by 2023, allowing them to invest more than $1 billion in technological advances.

How did the stock price move?

Should you buy, hold, or sell the stocks?

S&P Global

The current consensus among 11 polled investment analysts is to buy stock in S&P Global Inc, according to CNN Money. The 7 analysts offering 12-month price forecasts for S&P Global Inc have a median target of 399.00, with a high estimate of 415.00 and a low estimate of 353.00. The median estimate represents a +22.24% increase from the last price of 326.40.

IHS Markit Limited

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