Financial institutions M&A sector trends: stock exchanges/clearing houses — H1 2019 and outlook for H2 2019
CURRENT MARKET
WE ARE SEEING
- Inorganic expansion by larger exchanges:
- Horizontally (e.g., Euronext's acquisition of control of Oslo Børs and ATHEX's equity investment in Kuwait Stock Exchange)
- Vertically (e.g., LSE's acquisition of additional 4.9% of Euroclear and securing of board representation)
- Deployment of investment capital resources towards fintech (in particular, data analytics)
KEY DRIVERS
- Building multijurisdictional scale:
- Within Europe (e.g., Euronext operates exchanges in Paris, Lisbon, Amsterdam, Brussels and Oslo)
- Europe outbound (e.g., Athens Stock Exchange's consortium acquisition of 44% of Kuwait Stock Exchange)
- US inbound (e.g., Nasdaq operates exchanges in Copenhagen, Stockholm, Helsinki, Tallinn, Riga and Vilnius)
- Concerns around non-viability of the independent stock exchange operation model in the long term
- Bolt-on acquisitions:
- Investment in trade efficiency technology
- Diversification into information and post-trade services
- Nationalistic attitudes and perceived market foreclosure apprehensions continuing to mar transactional deals
TRENDS TO WATCH
- Larger exchanges seeking scale. However, mergers between core European exchanges are unlikely, and antitrust concerns will need careful navigation (e.g., divestment commitments)
- Investors in larger exchange operators seeking to cash out
- Possibility of smaller deals in the foreign exchange and commodities space
OUR M&A FORECAST
M&A to achieve scale is still high on agendas of the boards of core European exchanges. However, the aborted LSE/ Deutsche Börse merger highlights the political, antitrust and regulatory challenges for an EU merger-between-equals.
Other financial services—Publicly reported deals & situations
Inorganic growth
Acquisitions:
- Deutsche Börse: Acquisition of Axioma (April 2019)
- London Stock Exchange: Acquisition of 4.9% of Euroclear (January 2019)
Horizontal cooperation:
- MarketAxess: ETF JV with Virtu (April 2019)
Vertical cooperation:
- SIX: Global sanctions data JV with Eagle Investment Systems (April 2019)
International expansion
Out-bound:
- Euronext: Acquisition of majority control of Oslo Børs (May 2019)
- Nasdaq: Acquisition of 37% of Oslo Børs (April 2019)
- Athens Stock Exchange: Consortium acquisition of 44% of Kuwait Stock Exchange (February 2019)
In-bound:
- Singapore Exchange: Acquisition of 20% of BidFX (March 2019)
Digital world demands– outsourcings and bolt-ons
- London Stock Exchange: Acquisition of Beyond Ratings (June 2019)
- Liquidnet: Acquisition of RSRCHXchange (May 2019)
- Deutsche Börse: Multi-year cloud services contract with Microsoft Azure (May 2019)
- Nasdaq Technology: Acquisition of Cinnober Financial Technology (January 2019)
- IHS Markit: Minority equity investment in Digital world Cobalt (January 2019)
Regulatory intervention
- European Central Bank: Strong criticism of new proposed ESMA powers for boosting supervision of clearing houses (March 2019)
- European Securities and Markets Authority: Proposed new powers to monitor clearing houses' risk management and to determine whether non-EU institutions should move to the EU (March 2019)
Brexit contingency planning
- Aquis Exchange: French Prudential Supervision and Resolution Authority approval for new Paris hub (January 2019)
[View source.]
