Interactive Data has confirmed today that it is exploring “strategic alternatives” for its future, but has declined to provide any more explanation as to what these alternatives may include. The number three data provider in the financial markets is likely seeking a suitable marriage partner, but who is likely (or able) to offer its hand?
Interactive Data has performed relatively well during the market downturn and worked hard to earn its place as the number three data provider, after mega corporations Thomson Reuters and Bloomberg, but it seems that Pearson, which owns a majority stake in the business, is reviewing whether to sell up and exit the financial services business. Pearson owns a 61% stake in Interactive Data, which is valued at US$2.4 billion and was acquired back in 2000. The publishing giant seems keen to get away from the financial services market in general and is also rumoured to be in talks to sell the Financial Times, potentially to Bloomberg.
The option for the sale of Interactive Data has also long been in the background but was deemed unlikely to happen under the stewardship of Interactive Data veteran CEO Stuart Clark. Clark, however, was replaced by ex-president of sales and marketing for the vendor, Raymond D’Arcy, last year and it seems the new management is much more open to the idea.
But who is in a position to buy the business? If the rumours about the FT are indeed true, Bloomberg may be in the frame, but given its previous reticence to purchase large organisations, this seems unlikely. It may also face anti-trust issues (a significant problem for vendors of its size) and this issue would also likely affect rival Thomson Reuters. Moreover, given that Thomson Reuters is still in the throes of a merger, engaging in another may prove to be a bridge too far.
This puts Standard & Poor’s into the frame. It has a reasonably compatible set of businesses; Lou Ecclestone’s FIRMS business line in particular would sit particularly nicely alongside the Interactive Data pricing and valuations offering. It is also likely to be more of a culturally appropriate fit for the data vendor than one such as Bloomberg, which has not traditionally been focused on the back office space.
Of course, there’s always the private equity option and it seems likely that Interactive Data’s relatively robust performance over the recession period will have caught the eye of the private equity world. Interactive Data’s revenue rose by 1.2% to US$563 million in the nine months to September 30 last year. This stability in times of stress will make it an attractive, if expensive, proposition.
For now, we’ll have to wait and see what transpires. According to a spokesman for Pearson: “Pearson and Interactive Data can give no assurance on the potential outcome or timing of this review process, and do not intend to make any further statements unless and until it becomes appropriate to do so”.