Investment bankers who work on mergers and acquisitions in the finance sector had a busy year in 2018. Some of the biggest names in capital markets were involved in billion-dollar deals to expand their businesses. There was also a significant number of smaller deals, particularly among technology vendors and brokerages looking to expand their geographic footprint, target a niche market, or bring in additional capabilities.
The following six M&A transactions reflect key trends in the global capital markets and indicate what kind of deals we might expect in the year to come. In some cases, such as CME Group's acquisition of NEX, the transactions involved companies directly engaged in the trading and clearing of derivatives. In other cases, such as Intercontinental Exchange's acquisition of Bondpoint, the transactions were outside the derivatives markets, but we have included them on the list because of their implications for trading technology, data solutions and market structure.
For a full timeline of noteworthy 2018 deals, click here.
1) Blackstone-Led Group Targets Market Data with Refinitiv
One of the biggest deals of last year came in January, when a consortium of private equity investors led by Blackstone entered into an agreement with Thomson Reuters to spin out its financial and risk businesses. The $17 billion deal closed in October, with the consortium taking a majority stake of 55% of the new company and Thomson Reuters retaining 45%. The new company, now known as Refinitiv, boasts that it is one of the world’s largest providers of financial markets data and infrastructure, serving more than 40,000 institutions worldwide through products such as Eikon, Elektron and Redi. The company also owns two OTC trading venues: Tradeweb, a leading electronic platform for bank-to-client trading in fixed income products, and FXall, a similar type of platform for foreign exchange. Blackstone reportedly is considering whether to sell its stakes in these venues, a move that would trigger another round of deals in 2019.
2) CME Acquires NEX
In March, CME Group offered up $5.5 billion for Britain's NEX Group, the owner of two leading trading platforms as well as a suite of technology companies focused on serving financial institutions. The deal extends CME's operations into the cash FX market through the addition of EBS, one of the largest platforms for spot trading of FX, and into the fixed income market through the addition of BrokerTec, the largest platform for Treasury securities. The deal cleared a key regulatory hurdle at the end of October, when the U.K.’s Competition and Markets Authority said it would not investigate the deal further for any antitrust concerns, and closed in November. CME executives see great potential from cross-selling of cash and futures products in both FX and rates, from integrating access to cash and futures, and from cross-margining the two set of products. Another big benefit could come in the post-trade area, where NEX's TriOptima compression service can be used to drive more capital efficiencies for users of CME's clearinghouse.
3) Nasdaq Makes Two More Deals for Technology Companies
Through a pair of 2018 acquisitions, Nasdaq continued its efforts to establish itself as a leading provider of data, analytics and trading services for exchanges, intermediaries and investors. In September, the exchange group made a $190 million bid for Cinnober Financial Technology, a leading provider of trading and clearing systems for exchange-traded markets. Nasdaq said the deal would strengthen its position as one of the top providers of market infrastructure technology to exchanges and clearinghouses around the world. Getting shareholder buy-in proved harder than expected, however. Nasdaq raised its offer to $220 million in December, and as of mid-January it had succeeded in getting more than 90% of the company's shareholders to agree to the sale. In December Nasdaq made a smaller but equally interesting deal for Quandl, a Canadian company founded in 2012 that distributes financial, economic and "alternative" data to asset managers and other market participants. Quandl's database spans information on capital markets, energy, shipping, healthcare, education, demography and more, with more than 30,000 users at hedge funds, banks and other firms using it to get an edge in their trading decisions. Shortly after closing the deal, Nasdaq integrated Quandl with its Analytics Hub, the platform it created in 2017 for collaborating with alternative data providers.
4) Ion Continues Vendor Consolidation Strategy with Fidessa Acquisition
ION Group added yet another business to its family of technology solutions through the acquisition of Fidessa, one of the top providers of front-end trading technology and exchange connectivity in the equity and listed derivatives markets. Though Fidessa had agreed to sell out to Switzerland's Tenemos, Ion Group outbid them with an offer worth roughly $2.1 billion. Privately held ION has made nearly a dozen acquisitions over the last decade, including Rolfe Nolan in 2008, Patsystems in 2012, FFastFill in 2013, Caplin Systems in 2015, and Openlink Financial in 2018. In 2016 it raised $400 million in capital for future growth through the sale of a minority stake to Carlyle Group, the Washington, D.C. based private equity firm. ION said Fidessa's footprint in equities and derivatives will complement its strengths in fixed income and FX and cement its position as a leading provider of trading technology to banks and brokers.
5) ICE Adds TMC Bonds to Portfolio of Fixed Income Properties
In May Intercontinental Exchange spent $685 million in cash to buy TMC Bonds, an electronic trading platform for municipal bonds, corporate bonds and other fixed income securities. Established in 2000 as TheMuniCenter, TMC Bonds is particularly strong in the retail segment of the fixed income marketplace. The move was the latest in a series of acquisitions ICE has made in this sector, including the $5.2 billion purchase of Interactive Data Corporation in 2015, the purchase of a securities pricing service and a credit market analysis service from S&P Global in 2016, the purchase of a majority stake in a mortgage registry in 2016, the purchase of Bank of America Merrill Lynch’s fixed income index platform in 2017, and the $400 million purchase of Bondpoint from Virtu Financial in late 2017. Key to the strategy is the combination of trading and data infrastructure, which ICE believes will become more valuable as the fixed income marketplace migrates to electronic trading and the trading process becomes more automated.
6) Marex Spectron Buys Futures Customer Business from Rosenthal Collins
One of the final deals of the year, commodities broker Marex Spectron announced in December its plans to acquire the customer business of Rosenthal Collins Group, an independent futures commission merchant based in Chicago. RCG is a specialist in North American markets for grains and livestock while Marex Spectron traditionally has focused on European markets for energy, metals, and agricultural commodities such as sugar and coffee. Marex Spectron said that it will take control of roughly 14,000 client accounts and 150 RCG employees, and highlighted the value of RCG's extensive network of introducing brokers across the U.S. and its deep roots in the Chicago futures marketplace. Financial terms of the deal were undisclosed, and the transaction is still pending finalization.
