Be the first to know about every new Coronavirus story

One invitation to start: Join DD’s Robert Smith this Thursday, December 3 for a look back at some of the most high-profile accounting scandals in recent years with Carson Block, the short-seller behind Muddy Waters Research. Be sure to register here.

Welcome to the Due Diligence briefing from the Financial Times. Not a subscriber? Sign up here. Drop us a line and join the conversation: Due.Diligence@ft.com.

Trust the data: S&P’s massive play for IHS Markit

In a year marred by buzzwords such as “unprecedented” and “uncertainty”, there’s a certain comfort in the resoluteness of data — offering succinct answers in an increasingly unpredictable world.

Financial data providers have been on an M&A blitz since before the global pandemic, kicking off with the London Stock Exchange’s $27bn acquisition of Refinitiv last year. 

The dealmaking continued with the New York Stock Exchange owner Intercontinental Exchange’s $11bn purchase of US mortgage data provider Ellie Mae in August

On Monday S&P Global agreed to buy its London-based rival IHS Markit for $44bn, in a move to unite two of the largest data providers and creating a powerful challenger to financial information powerhouse Bloomberg, DD’s James Fontanella-Khan and Ortenca Aliaj reported.

The financial data market is dominated by two key players — Michael Bloomberg’s eponymous group and Refinitiv. Together they seized more than 50 per cent of the almost $32bn annual revenue pool in 2019, according to Burton-Taylor International Consulting. By comparison, S&P Global and IHS only controlled about 8 per cent.

But it’s not just about disrupting the industry’s top players. The deal will push S&P’s business further into data, reducing the sway its namesake ratings business — which accounted for more than half of its overall operating profit last year — has over its total revenues and income.

“The last two decades has been about chasing the two behemoths, but to beat them you need to do it by going after the data of the future,” Robert Iati, a director at Burton-Taylor, told the FT’s Robin Wigglesworth and DD’s Eric Platt.

It’s only fitting the consolidation has further accelerated at a time when data is king. Just look at Silicon Valley’s technology giants, which have demonstrated the power of near-oligopolistic business models for gathering data. 

“There’s some truth to the ‘data is the new oil’ cliché,” said Iati. “Data is a bit like crude oil in that it’s ubiquitous and cheap to acquire and store. It’s more about how smart the analytics are.” 

The deal between S&P Global and IHS is likely to face scrutiny from antitrust watchdogs over the immense power an alliance between the two groups could wield. The companies need only look at the plight experienced by LSE and Refinitiv in Brussels over their smaller tie-up to get a good indication of what’s to come. 

The Spac boom serves as a Wall Street legend’s final act

Just 20 years ago, the hotshot boutique investment bank Wasserstein Perella was acquired for $1.5bn by the German bank Dresdner.

Today another incarnation borne by Joe Perella, Perella Weinberg Partners, is gearing up for a landmark liquidity event. The figures bandied about this time are, alas, smaller.

The FT reported on Sunday that PWP was in advanced discussions to merge with FinTech Acquisition Corporation IV, a Spac sponsored by Pennsylvania banking tycoon Betsy Cohen.

Betsy Cohen was one of the earliest female entrepreneurs in the commercial banking industry © Johnny Nunez/Getty Images

The overall enterprise value of PWP is just around $1bn, a modest figure for a group that began with immense fanfare in 2006. Perella was one of the first specialist M&A bankers, making his name at First Boston in the 1970s.

But the revolution he helped start on Wall Street has created a series of talented copycats, many of whom have left PWP struggling to keep pace.

The PWP reverse merger, which may be announced in December, will help the company reduce the debt it took on when it acquired Texas boutique Tudor, Pickering, Holt & Co in 2016, as well as give liquidity to early backers and former partners. 

Joe Perella © Bloomberg

PWP has been working for years to get the chance to list its shares and join the public ranks where rivals such as Evercore, PJT Partners and Moelis have prospered. The 2021 deal outlook looks juicy with high valuations and low interest rates giving the new shareholders the shot at an auspicious start. 

Now in his late 70s and in the twilight of his career, Perella is leaving the group’s day to day management to co-founder Peter Weinberg, Wall Street royalty in his own right. 

While Perella’s second act as an entrepreneur may not have been as dazzling as the first, he retains a legacy virtually no one else in investment banking can match.

Nikola kills the Badger

Those who put down a deposit for Nikola’s Badger truck will have a little more money to spend this holiday season. 

In an announcement on Monday, Nikola said it would reimburse millions of dollars in customer deposits for the Badger after deciding to kill off plans to produce the vehicle, less than a year since it was announced to the public.

Nikola’s Badger truck

But that’s not all. Nikola also revealed a revised deal with General Motors, that was significantly scaled back from the one announced in early September. First off, GM will no longer be taking a stake in Nikola.

Secondly, the non-binding agreement between the two companies downgrades the start-up from a technology and manufacturing partner to a customer of GM’s hydrogen fuel cell system.

Badger was part of the strategic partnership between the Arizona-based start-up and GM, which had agreed to take an 11 per cent stake in Nikola — at the time worth $2bn — to help the company produce the truck as well as provide crucial technology for its development.

Trevor Milton, Nikola founder © FT montage; Reuters

The significant pullback from GM is not a great look. A partnership with a big carmaker lent Nikola some credibility in the public markets. Shares in the company were down 27 per cent when markets closed. 

The crucial step now is striking a deal with a big energy company that can help Nikola build its hydrogen fuel stations. But that partner will have to overlook a Department of Justice investigation, the departure of its founder Trevor Milton amid accusations of fraud, and short-seller allegations that the company has exaggerated its technology. 

Job moves

  • The head of the Tokyo Stock Exchange, Koichiro Miyahara, has resigned over a debacle that closed the $6tn bourse for a day in October, the worst outage the exchange has suffered since going fully electronic in 1999. Akira Kiyota, chief executive of the TSE’s owner Japan Exchange Group, will take over with a 50 per cent pay cut. More here.

  • Lloyds has poached HSBC global head of wealth and personal banking Charlie Nunn as its new chief, replacing António Horta-Osório

  • Natixis has promoted Ammar Bukhamsin to chief executive of its Saudi Arabian operations. Bukhamsin has been with the French bank since 2015, most recently as its head of global market sales in Dubai. He replaces Reema Al-Asmari, who left the bank after six months in the role. More here from Bloomberg.

  • UniCredit chief executive Jean Pierre Mustier will step down next April. More here.

  • Russian gold producer Petropavlovsk has hired Denis Alexandrov, who resigned from its competitor Highland Gold last week, as its new chief executive. More here.

Smart reads

The bargain hunter As Sir Philip Green’s Arcadia retail empire crumbles beneath the weight of the coronavirus crisis, he will be remembered as a master dealmaker, turning cheap acquisitions into gold. His retailing abilities and personal character remain subjects of debate. (FT)

Back from the grave After nearing bankruptcy, Chinese electric vehicle start-up NIO has risen to become the world’s fourth most valuable carmaker, surpassing GM and Daimler. Its resurgence as “China’s Tesla Killer” and climbing valuation is in part thanks to a rally stoked by Elon Musk himself. (Wall Street Journal)

Beyond the glass ceiling Jane Fraser will soon become the first female chief executive of Citigroup. Her first order of business: modernising for the post-Covid digital era and building out its custody and wealth management arms. (Bloomberg)

News round-up

Arm China chief defends move to seize control of unit (FT)

Credit Suisse spied on more employees than previously disclosed (WSJ)

Bruno Crastes: ‘French Soros’ fights for H2O’s future (FT) 

Xavier Niel-backed Spac looks to build organic food ‘champion’ (FT)

Rio Tinto Mongolia row worsens as US hedge fund issues legal threat (FT)

Facebook nears purchase of start-up valued at $1 billion (WSJ) 

Global tech founders back London-based start-up fund (FT) 

Lebanon’s Central Bank fuels corruption, extremism concerns (WSJ)

Carlyle sells stake in PA Consulting (FT)

Due Diligence is written by Arash Massoudi, Kaye Wiggins and Robert Smith in London, Javier Espinoza in Brussels, James Fontanella-Khan, Ortenca Aliaj, Sujeet Indap, Eric Platt, Mark Vandevelde and Francesca Friday in New York and Miles Kruppa in San Francisco. Please send feedback to due.diligence@ft.com

Get alerts on Mergers & Acquisitions when a new story is published

Copyright The Financial Times Limited 2021. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article