BlackRock-Preqin: It’s the data, Cupid!

Like weather forecasters in a British summer, the data dealmakers have been busy these past few weeks. No sooner had I received a tip that Preqin, a UK-based provider of data on private markets, might be for sale than asset management behemoth BlackRock announced a deal to buy the company for $3.2 billion. 

Also last week, the London Stock Exchange Group struck a news and data-sharing deal with Dow Jones that seems, to me, a direct result of how the former Reuters business was carved out of Thomson Reuters and sold to Blackstone Group, which then flipped it to LSEG.

So, quite a bit to keep us commentators busy. Bravo, dealmakers, bravo.

First, BlackRock and Preqin. While it’s true that M&A premiums have been increasing in general, BlackRock’s $3.2 billion purchase price for Preqin is a 13-times multiple of the vendor’s estimated $240 million revenue for this year. 

Why would BlackRock pay so much? Investments into privately held assets are growing fast. In its announcement, BlackRock notes that alternative assets are expected to reach a value of almost $40 trillion by 2030, and that spend on private markets data is expected to rise to $18 billion over the same period, from $8 billion today. Plus, Preqin’s revenue has grown around 20% per year over the last three years.

BlackRock’s $3.2 billion purchase price for Preqin is a 13 times multiple of the vendor’s estimated $240 million revenue for this year

However, that $8 billion figure seems to only include private equity investments—trading stock in pre-IPO companies (you can read more on that trend here). But there are other private markets, including private debt, natural resources, infrastructure, and real estate, that bring the total market for alternative assets to $13 trillion, according to BlackRock’s own 2024 Private Markets Outlook.

The Preqin deal will bring an additional 4,000 client relationships representing more than 200,000 users—comprised of asset managers, banks, insurers, pension funds, wealth managers, and service providers—to BlackRock, whose Aladdin platform already serves more than 1,000 clients. 

BlackRock—itself a client of Preqin for “many years”—will combine the vendor with its existing alternative investments management platform, eFront, which BlackRock acquired in 2019.

The overwhelming majority of companies in the world are privately held—i.e., their stock is not listed or traded on exchanges. Many are small, independent companies and mom-and-pop shops. At the other end of the spectrum are so-called “unicorns” with valuations in the billions of dollars but which resist going public. And in the middle is a vast ocean of growth companies across myriad industries and sectors. 

Until relatively recently, you had to be a “friends and family” investor or specialist venture capitalist to get into these companies early and ride the wave of their growth—or steer it—to a sale or IPO. But now there are marketplaces for unlisted securities, and private markets are the fastest-growing segment of asset management, BlackRock says.

BlackRock notes that alternative assets are expected to reach a value of almost $40 trillion by 2030, and that spend on private markets data is expected to rise to $18 billion over the same period, from $8 billion today

Providing data on these private companies and markets is not easy. There are fewer reporting and filing requirements, and no public market datasets, so to speak. Vendors who painstakingly collect, compile and augment this data to create a similar offering to data on listed companies, such as Accelex, Canoe Intelligence, and ApeVue, are a growing niche of providers that—based on the Preqin deal—will see their own valuations increase quickly.

Aside from BlackRock, other large asset managers, as well as banks and custodians with platforms serving asset manager clients would likely want to snap up these types of providers. 

But I also wouldn’t be surprised to see exchanges try to get in on the action—especially giants like Intercontinental Exchange, which have a habit of identifying investor needs and taking advantage of gaps in the market, and who aren’t afraid to branch into new areas. For example, Ice’s $11.9 billion acquisition of mortgage servicing provider Black Knight gave Ice the technical ability to service the entire lifecycle of loans from origination to payment collection. 

Regulated exchanges have unique experience in operating marketplaces, capital formation, and providing transparent market data, and can guide privately held companies from raising liquidity and attracting investors, ultimately through to a public IPO. Nasdaq, for one, already does this with Nasdaq Private Market. Other independent marketplaces include Overland, Kansas-based Lodas Markets and Vancouver-based InvestX Capital.

For investors—institutional or retail—the abilities to analyze public and private companies, make comparisons, find correlations, use that analysis to identify how the public and private markets converge and diverge, and to invest in private markets while laying off risk in public markets, will be real game-changers. It will open up these markets to more investors, more capital, and more liquidity, and allow investors to reap the rewards from potentially higher-gain private markets. 

Of course, these are also high-risk markets, but the ability to apply the same tools and analyses to these investments that are already used in public markets could provide much better insights, and greater transparency through more and better data would help reduce that risk.

And speaking of regulated markets in the hunt for data, that brings us neatly to LSEG’s latest news: a data, news and analytics partnership with Dow Jones.

Under the terms of the multi-year deal (the parties didn’t specify precisely how many years), Dow Jones will embed LSEG’s data and analytics in its editorial properties, such as The Wall Street Journal, Barron’s, Investor’s Business Daily, and MarketWatch, and will incorporate LSEG’s Deals Intelligence and League Tables into The WSJ’s coverage of business deals. 

LSEG’s Workspace terminal will also be made available in Dow Jones’ newsrooms to support “a data-driven newsroom,” including data from its Datastream, Fundamentals & Estimates, StarMine, and Pricing and Reference Data services.

In return, LSEG will integrate news and commentary from Dow Jones into Workspace at no additional charge, and the companies will collaborate on developing a customized and curated Dow Jones news component within Workspace that they plan to launch early next year.

In years gone by, such an agreement would have been unthinkable, because the two vendors—Reuters, as it then was, and Dow Jones—have been bitter rivals, competing for dominance of the newswire market, but also over data; not only did Dow Jones once own rival terminal supplier Telerate, but more recently, it went through a transformation as former Bloomberg CEO Lex Fenwick took over and began reshaping the business in Bloomberg’s image. 

That plan didn’t work out, and Fenwick departed abruptly after less than two years in the role.

(And while I’m giving the CliffsNotes version of this history, Thomson Financial—then the third-largest data provider behind Bloomberg and Reuters—acquired Reuters in 2007, creating Thomson Reuters. Then, 12 years later, it divested most of that business to Blackstone Group, who promptly sold it at a premium to LSEG, which then bolstered its technical capabilities with the 2022 acquisition of US-based low-latency feed handler and data provider MayStreet. All caught up now? Good. And again, bravo, dealmakers, bravo.)

But that was then, and this is now, and priorities have changed almost as much as the structure and profile of what was once Reuters. 

If I were Thomson Reuters, I’d be casting a suspicious eye over LSEG’s new news bestie, to make sure none of my premium content is finding its way into my opponent’s hands

And for me (data geek alert!), one of the interesting—and potentially most opportunistic—aspects of the deal is that Dow Jones will also be able to use LSEG’s classification, tagging, and search capabilities (I always considered the capabilities of what was known as Reuters Insider to be ahead of their time), which includes a wealth of reference data and identifiers for mapping securities and entities to data points and news coverage, creating greater linkages between structured and unstructured data. 

This, the parties say, will result in expanded feed offerings, while LSEG will be able to offer Dow Jones’ text-format news feeds to subscribers—presumably deeply mapped using those classification and tagging schemas—in a way that delivers extra value and insight, and will use this content to bolster its news analytics services.

Of course, this tight-knit agreement begs the question: what about Reuters News? The jewel in the crown of the Reuters empire was an asset that Thomson Reuters kept while hiving off the Financial & Risk business (aka the data arm, which was renamed Refinitiv). Baron Julius von Reuter’s original business wasn’t included in the sale to LSEG, but Thomson Reuters sweetened the deal with a 30-year access to Reuters News for Refinitiv, which doesn’t expire until 2048. 

Sources have said this news add-on comes at a hefty premium, and LSEG may not have the stomach for it (despite LSEG’s index subsidiary FTSE having its own joint venture with Canadian exchange group TMX, which is also the domicile of Thomson Corp. Am I saying that TMX will buy Thomson? Of course not. I wouldn’t wildly speculate about exchange groups buying their local data vendors). 

But if I were Thomson Reuters, I’d be casting a suspicious eye over LSEG’s new news bestie, to make sure none of my premium content is finding its way into my opponent’s hands.

The point of all this? In the data industry as a whole, we continue to see not only consolidation, but a “verticalization” that aligns vendors and marketplaces, users and datasets. 

Some of the strategists within these companies—who I credit as being much smarter than myself, and who see upcoming shifts in trends and marketplaces long before me and others—are already predicting the drivers of group revenues a decade in advance, and are engineering the deals that will future-proof and protect those revenues. 

Those who don’t have their eyes on the future are doomed to remain rooted in the past.

Want to share your vision of the future? Write me at max.bowie@infopro-digital.com.