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Silver Lake and Warburg Pincus Complete Interactive Data Acquisition, Watch This Space for Strategic Restructuring…

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Following three months of crossing Ts and dotting Is, private equity firms Silver Lake and Warburg Pincus have finally completed their acquisition of data vendor Interactive Data. As per the terms agreed back in May and within the third quarter deadline that was set, the vendor’s stock will cease to be traded on NYSE and its stockholders will receive US$33.86 in cash, without interest and minus any applicable withholding taxes, for each share of Interactive Data common stock they own.

Interactive Data’s president and CEO Ray D’Arcy, for one, is hopeful that the buy out will represent an important “strategic milestone” for the vendor and explained to Reference Data Review back in May that he expects it will benefit from much closer relationships with the firms that Warburg Pincus and Silver Lake already own, including the latter’s SunGard Data Systems. Exactly how close these players will work together should become clear over the coming months, as the dust settles on the sale.

According to an insider involved in the transaction, the private equity owners are keen to split the real-time data business from the pricing and valuations solution set. The decision to acquire Interactive Data in its entirety, rather than just the 61% share on offer from Pearson, gives the private equity firms free rein to do what they please with the business and it seems a breakup is potentially on the cards.

The Pricing and Reference Data business could therefore sit within SunGard’s Data Management portfolio, alongside current offerings Fame and StreamCore. After all, SunGard’s outsourcing and workflow tools could complement Interactive Data’s wider valuations and data offering much the same as potential acquirers such as McGraw Hill. Whereas Interactive Data’s Real-Time Market Data & Trading Solutions business wouldn’t be out of place within SunGard’s overall Trading solution set, which includes Protegent, the recently launched Valdi portfolio and the SunGard Transaction Network.

However, this is all speculative at the moment, as the vendor and its new owners are seemingly keeping their cards close to their chests. D’Arcy has said that he wants to leverage the vendor’s new ownership structure to become much more competitive in the market and a strategy has been put in place, but apart from references to geographical expansion and the rather vague “working together” with other firms owned by the private equity firms, exactly what comprises this strategy is unclear at the moment.

No doubt, the new owners will seek to reduce inefficiencies within the overall Interactive Data solution set; it is no secret there are ample opportunities to better tie together solutions the vendor has acquired over the years. As with any other buy out, a series of management shakeups is also most certainly on its way (see Netik for one such example). Given the rather muted performance displayed by the vendor during the last quarter, with a 31.4% drop in net income on 2009’s figures for the same quarter, Silver Lake and Warburg Pincus will likely seek out these inefficiencies forthwith. The dreaded rationalisations are on the cards.

In the meantime, Interactive Data stockholders of record will soon receive a letter of transmittal from the Company’s payment agent, American Stock Transfer & Trust Company, with instructions describing how to receive their proceeds. Banks, brokerage firms or other nominees will provide those stockholders who hold their shares in “street name” with their proceeds from the transaction.

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