IHS makes its mark on financial sector with $5.9bn Markit buy

Contact: Mark Fontecchio

IHS pays $5.9bn for Markit Group, the biggest deal in online financial information and analysis, according to 451 Research’s M&A KnowledgeBase. The acquisition increases IHS’s headcount and revenue by about 50%, giving it strong entry into online reference and analysis data in the financial sector to complement its similar offerings in the energy and automotive verticals. While the two vendors perform similar functions, their customer bases don’t overlap much, with IHS’s clients including most of the top oil and automotive companies and Markit selling to banks, hedge funds and other financial institutions.

IHS and Markit will merge to form a new entity called IHS Markit, of which IHS shareholders will own 57%. The transaction values Markit at 5.9x trailing revenue, a few ticks higher than the 5.5x multiple that Intercontinental Exchange paid for Interactive Data Corp (IDC) in a similar deal last October. IDC’s revenue had a 3.8% CAGR over the previous five years, compared with Markit’s roughly 10% CAGR over the previous four years. That said, Markit’s 4.5% revenue increase to $1.1bn last year was considerably slower than previous rates in the 10-12% range.

The move marks the third $5bn+ transaction in financial technology in the past year, and highlights fintech M&A as one of the few bright spots this quarter. While overall deal value is down about 30% to $62bn thus far in 2016, the Markit sale has lifted fintech M&A up 79% to $7.4bn. The transaction is expected to close in the second half of this year. M. Klein and Company, Goldman Sachs and Bank of America Merrill Lynch advised IHS, while J.P. Morgan Securities banked Markit.