Finance has traditionally relied on expertise, networking, and intelligence. However, data has now become the hottest commodity in the field, with its increasing availability and growing appreciation among investors. This has led to an intensification of the arms race among data providers, who are hastening their efforts to acquire each other. This trend explains why the British data provider for private markets, "Burken," is offering itself for sale at a value exceeding one billion pounds sterling. It is also the latest example in a series of mergers, which included massive deals such as "S&P's" acquisition of "IHS Markit" for $44 billion in 2020 and "LSEG's" purchase of "Refinitiv" for $27 billion, in addition to numerous smaller acquisition deals.
Private market data, which is difficult to obtain and highly valued by wealthy clients, is in particular demand. Consequently, major companies such as "Morningstar," "BlackRock," and "MSCI" have focused on bringing specialized service providers in-house. It is also easy to understand why major data groups are committed to the acquisition path; their clients are seeking more products, and acquiring a competitor with different sources and a distinct customer base creates opportunities for cross-selling. More importantly, they can combine different datasets and specialties to create new business lines.
It is not unlikely that "S&P Global," which is said to be considering purchasing "PitchBook," has in mind the idea of developing a private equity index. There is a sense of urgency in this rush, as data value is expected to increase. With the emergence of large language models (LLMs), the decisive factor will be the ability to feed and train them on high-quality proprietary data. This provides a strong incentive for leading providers with the financial resources to invest in large language models to store more data.
In addition to benefiting from the data boom, "Burken" is also capitalizing on a market that has seen exceptional growth, where private assets have risen to over $14 trillion, and its revenues have grown at a compound annual growth rate of 24% in the three years leading up to 2022, making its valuation of one billion pounds sterling—7.5 times its revenue in 2022—seem entirely reasonable. Russell Quillsh from "Redburn" believes that "MSCI" evaluated "Burgess" at ten times the previous year's revenue, while "Morningstar" purchased the credit-focused "LCD" at 11.6 times its revenue. This might provide sufficient justification for founder Mark O'Hare to continue the sale process. However, it is noteworthy that individuals closer to the private equity world are now choosing to liquidate, especially as the industry enters a more challenging phase in its history. Investors must take this into account.
