Nasdaq's latest deal shows data reigns supreme

At Nasdaq in Times Square, New York. CEO Adena Friedman said the US$705 million (S$961.8 million) purchase of eVestment is part of a "concerted effort" to branch out and will help the exchange further cosy up to asset managers. She said the exchange
At Nasdaq in Times Square, New York. CEO Adena Friedman said the US$705 million (S$961.8 million) purchase of eVestment is part of a "concerted effort" to branch out and will help the exchange further cosy up to asset managers. She said the exchange has already cemented its ties with brokers and public companies, but wants to sell more data straight to money managers.PHOTO: AGENCE FRANCE-PRESSE

Takeover of eVestment shows exchange operator's hunger for data, tech capabilities

NEW YORK • Nasdaq's takeover of data provider eVestment spotlights the exchange industry's seemingly bottomless appetite for data and its emerging focus on cultivating a closer relationship with money managers.

The exchange operator agreed to pay US$705 million (S$961.8 million) for eVestment, a company that sells data and analytics to customers such as hedge fund managers and institutional investors.

The firm has more than 2,000 clients that use its database to analyse 74,000 investment vehicles. The deal will be financed with a mix of cash and debt, Nasdaq said in a release on Tuesday.

The acquisition, the first major deal under new chief executive officer Adena Friedman, is a demonstration of Nasdaq's ramped-up focus on expanding beyond its core business of facilitating stock trades, as the company builds up its data and technology capabilities.

About 24 per cent of Nasdaq's second-quarter revenue came from its index and data operation, while 37 per cent came from helping to arrange trades in financial instruments such as equities, options and bonds.

Ms Friedman said on a call with analysts that the purchase is part of a "concerted effort" to branch out and will help the exchange further cosy up to asset managers. 

The data provider earned US$83 million in non-GAAP (generally accepted accounting principles) cash revenue last year, up 38 per cent from 2013. Ms Friedman noted that the growth came from finding new clients, increasing sales to existing customers and raising prices.

"From what we're seeing, we think the investment management industry is going to become a bigger and bigger user of data and technology," Ms Friedman said in a phone interview following the analyst call.

She added that the exchange has already cemented its ties with brokers and public companies, but wants to sell more data straight to money managers. Some of the material that eVestment collects and packages for its customers includes information on fund performance, strategies and portfolio content.

"They make sense of it and serve it up in an analytical format," Ms Friedman said. "They're a definitive source."

Competitors are also zeroing in on the data business as an avenue for growth. In 2015, Intercontinental Exchange, the owner of the New York Stock Exchange, bought data provider IDC for US$5.2 billion to expand its own data services business. IDC specialises in pricing corporate bonds.

Nasdaq has a history of expanding through deal-making. The exchange operator has been on an acquisition tear in the past two years, with deals that included a US$1.1 billion takeover of Deutsche Boerse's options market operator International Securities Exchange and Boardvantage, a business that allows corporate boards to exchange information.

Mr Rich Repetto, an exchange analyst at Sandler O'Neill & Partners, believes the eVestment deal could mark a small turning point for the exchange operator, amid that review.

"We suspect Nasdaq is signalling a small 'pivot' in asset allocation and strategy," Mr Repetto wrote in a client note.

"Nasdaq could be transitioning internal asset and investment allocation to a more 'team approach', compared with the more 'silo-ed' approach used in the past."

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A version of this article appeared in the print edition of The Straits Times on September 07, 2017, with the headline 'Nasdaq's latest deal shows data reigns supreme'. Print Edition | Subscribe