Who Should Buy Data Explorers?

Data Explorers is now apparently for sale. Given that the firm received a 60 million pound investment from private equity firm Bowmark in 2007, it makes sense that Bowmark would want to cash out at this point. The 2007 transaction valued DE at about 118 million pounds. Now the suggestion is that DE would like to get 300 million pounds, or US$468 million, for 100% of the firm. Arguments about the price aside, who should buy Data Explorers?

The most logical candidates to purchase DE are the large market data companies including Thomson Reuters and Bloomberg. DE has data redistribution agreements with these companies already and current CEO Donal Smith is a former Thompson employee. A purchase by one of these companies may irritate the other although given the scarce supply of data, neither party is unlikely to sever the relationship. The existing integrations would make a purchase easy. DE also has redistribution agreements with FactSet and McGraw-Hill subsidiary Capital IQ. A sale to one of those companies may cause less friction with the market data terminal leaders.

Equilend is another contender. Equilend has explored the idea of getting into the market data space on several occasions. While Equilend controls a large portion of securities lending transactional data between banks, Data Explorers’ knowledge of beneficial owners would add a new dynamic to what Equilend could offer the market. The analogy is adding context to an otherwise confusing ticker tape of diverse and non-standardized securities lending data. While Equilend’s owners have never approved a formal entry into the market data space, a potential sale of DE to a market data company could create a new incentive to take a look.

Quadriserv offers another possibility for Data Explorers, although as a private equity backed firm itself it Quadriserv would need to raise substantial capital for a purchase. In fact, a Quadriserv/Data Explorers combination would be a much of merger as it would in acquisition. While it is unlikely that this transaction could be pulled off, acquiring or merging with Data Explorers without a valuable new dimension to Quadriserv’s existing transactional and market data activity.

SunGard should be ruled out as a potential acquirer for Data Explorers. While SunGard’s ASTEC Analytics group is the main global competitor to Data Explorers, the market has indicated a very clear preference for having two securities lending data providers, not just one. By purchasing Data Explorers, SunGard would be all but gift wrapping an invitation to a new market entrant.

Data Explorers has succeeded in creating a market out of securities lending data including packaging the data in new and interesting ways for hedge funds and index providers. Their sales efforts and redistribution rights have given them access to valuable real estate. Now whether the price will be deemed worth the cost of entry to what DE has to offer is another question.

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