The $6.9 billion acquisition of Dun & Bradstreet (D&B) by a consortium of private equity investors led by CC Capital and Cannae Holdings, announced this week, could herald the streamlining and modernisation of the venerable 177-year-old, publicly traded credit data specialist, according to observers.
Founded in 1841 as a credit information provider, the company is best known for the Data Universal Numbering System (DUNS) Number – a unique nine-digit business identifier launched in 1963 and now used by over 300 million businesses around the world.
As an issuer of a unique entity identifier with broad appeal across industries, D&B was undoubtedly a pioneer in its field. But this broad application may have masked a major opportunity in global financial markets for the DUNS Number presented by the credit crisis of 2008. That identified the global need for a standard legal entity identifier (LEI), sparking the project to develop the unique LEI that has most recently been made mandatory for firms operating under the jurisdiction of MiFID II.
Given that DUNS Number assignment is both free and easily accessible (and is in fact automatically assigned to all registered businesses in the UK and Ireland already) could this system not have been used as the foundation of the LEI network?
We’ll never know, but it remains a fact that despite European regulator ESMA issuing a “no LEI, no trade” edict – the latest figures from the Global LEI Foundation (GLEIF) show that only 1,250,410 LEIs have so far been issued – a fraction of the 300 million DUNS Numbers worldwide. For its part, D&B is embracing the LEI, offering a “dynamically maintained cross reference” that aims to provide “high confidence identity resolution” between entities with both an LEI and a DUNS Number.
Observers suggest D&B’s new private equity ownership will allow the company more room to manoeuvre – and fewer constraints when it comes to growth and innovation. As a public company, D&B’s wings were clipped by its need to meet rigorous quarterly financial targets. Private equity ownership could make the firm leaner, hungrier, more agile, more aggressive and more innovative – placing it in a far better position to capture the enormous opportunities still available in the entity data space.
Interim CEO Thomas Manning has made no secret of his objectives in this area, with the announcement of a “strategic review” as soon as he took the helm in February 2018. In a Q1 2018 earnings call held in May he sternly criticised the company’s “complex” pricing, “cumbersome” processes and “insufficient hunting” within its sales organisation, calling for “systematic changes to simplify our processes and accelerate execution” and suggesting a “private equity playbook” model to unlock value.
It looks as if this approach has been successful. The D&B board of directors has unanimously approved the agreement, which will be funded through direct financing from the private equity investor group along with debt financing from banks including Bank of America Merrill Lynch, Citigroup and RBC Capital Markets, and is expected to close within six months.
“[The agreement] is the culmination of a thoughtful and comprehensive review of the value creation opportunities available to the Company as part of a full portfolio and business assessment and exploration of strategic alternatives with multiple financial sponsors. As a result of this process, the Dun & Bradstreet Board of Directors unanimously determined that this all-cash transaction with the Investor Group is in the best interest of our shareholders and our Company,” said Manning.
But could the company get a better deal? The $6.9 billion offer (representing $145 per share, or a premium of around 30% on the share price) is subject to a 45-day “go-shop” period during which D&B is able to actively solicit and negotiate alternative offers. Although the firm has noted that it will not disclose any further developments until it has made a final decision, it will be interesting to see if any other offers emerge from the woodwork – and in which direction the new owners, whoever they are, decide to take this venerable old firm.
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