New dawn for M&A at Morningstar

Contact: Scott Denne

Investment data and software company Morningstar makes its first purchase since 2010, reaching for ByAllAccounts, a data aggregation vendor. The deal supports Morningstar’s financial advisory software business by giving it technology that enables advisers to aggregate their clients’ portfolio performance data across asset classes.

In the years leading up to (and shortly after) the financial crisis, Morningstar picked off about four companies a year and inked 24 acquisitions between 2006 and 2010. While its revenue bounced back from pre-crisis levels by the end of 2010, it hasn’t put up the 25%-plus annual growth that it enjoyed for several years before that. Acquisitions weren’t the only reason for its higher growth back then (even its organic growth tended to be higher than it is today), but they did help.

The purchase of ByAllAccounts complements one of Morningstar’s underperforming units: software sales to financial advisers and wealth managers. While it’s the company’s second-largest business unit – accounting for 13.3% of its $698m in total revenue last year – its growth has been considerably slower than its institutional data business. With $93m in revenue, sales to financial advisers only grew 8% in each of the past two years, while the institutional data business grew 12% and 11% in those years.

Morningstar is paying $28m for ByAllAccounts. And though it’s the company’s first transaction in a while, it’s a typical one for Morningstar. This acquisition is just a hair above its $19m median deal value, according to The 451 M&A KnowledgeBase. Morningstar has never been a big spender, having only cracked the $50m mark on three occasions and never done a deal above $60m.

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Posted in M&A