As predicted in Reference Data Review last month, Interactive Data Corporation has agreed to buy the market data division of Xcitek and the market data assets of its affiliate Xcitax for $25.3 million in cash. The acquisition does not include XcitekSolutionsPlus (XSP), the corporate actions software company affiliated with Xcitek, or Xcitek Consulting Services, both of which will continue to operate as independent entities.
According to Howard Barnstone, vice president, acquisitions and alliances, Interactive Data Corporation, the “compelling idea” behind the acquisition “comes as we compare in more detail our respective data – Xcitek’s very strong North American coverage and our predominantly non-North American coverage”. “The ingredients are there to create a truly global service, and that is very compelling.”
The Xcitek market data business, based in New York, provides a range of North American corporate actions data, including reorganisation information as well as cost basis and class action data. The vendor provides content to more than 2000 institutions worldwide through a variety of delivery platforms including electronic datafeed services, proprietary web-based offerings and a network of redistributors, among them Interactive Data.
Xcitek and Interactive Data have been partners for some 20 years, in fact, distributing each others’ corporate actions content. Ray D’Arcy, president, sales, marketing and institutional business development, Interactive Data Corporation, says: “We have always been impressed by the domain knowledge and content within the Xcitek market data business. The company has a great reputation and is a natural fit for us, in light of our efforts during the past five or six years to build up our capabilities in the reference data space. The culture of Xcitek, with its domain expertise and understanding of the corporate actions area, is consistent with the way in which we differentiate – by having staff who understand the content and how organisations will utilise it.”
Since the Xcitek market data business was up for sale, Interactive Data took the opportunity to acquire it because “owning what we are distributing is always our preferred choice”, says D’Arcy. “Interactive Data has always taken the position that it is best to own our own content, and be in control of our capabilities. We are also buying Xcitek’s domain expertise: it is filled with very knowledgeable people, and we are purchasing those people and their brainpower to enhance our organisation and its capabilities in this particular asset category. As well as the new databases and reference data, the Xcitek people will be part of our strategy for promoting this particular asset class.”
While the transaction will not close for another couple of weeks, Interactive Data has drawn up a detailed integration plan, D’Arcy says. “We expect to retain the vast majority of the Xcitek staff and we are devising plans as to where the groups will be integrated within our company. We are already reaching out to Xcitek’s clients – with which there is an 80 per cent overlap with Interactive Data clients – and we will be continuing our conversations with them during the coming weeks,” he adds.
Marty Williams, vice president, institutional data delivery products, Interactive Data Pricing and Reference Data, says integrating the Xcitek data into the Interactive Data channels is not a major issue. “We have been redistributing the Xcitek data for some time, and that integration will remain for the foreseeable future,” he says. “We are looking for opportunities to put our data into the Xcitek products for their customers and their data into our products for our customers. There is a very natural fit, and we expect the process to be straightforward.”
Interactive Data is keen to capitalise on the Xcitek cost basis and class actions services, he continues. “These services are both examples of how the people at Xcitek have used their domain expertise to create new solutions from the data they are already collecting. People have been asking us for a cost basis service for a while now. Putting that data in the hands of our sales force through our sales channels represents a big opportunity. Class actions is a new area for us, but this is information that fits extremely well with the requirements of our target audience in the brokerage community.”
Based on the unaudited financial statements provided to Interactive Data, Xcitek’s market data business generated 2006 revenue of some
$9 million (net of $0.8 million generated from Interactive Data businesses) with operating expenses (net of $0.2 million in royalties payable to Interactive Data), including depreciation, of around $7.3 million.