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Nasdaq's Latest Deal Shows That Data Reigns Supreme

  • Global exchange buys EVestment for $705 million in debt, cash
  • EVestment offers specialized data for institutional investors

Nasdaq Inc.’s takeover of data provider EVestment Inc. spotlights the exchange industry’s seemingly bottomless appetite for data and its emerging focus on cultivating a closer relationship with money managers.

The exchange operator agreed to pay $705 million for EVestment, a company that sells data and analytics to customers like hedge fund managers and institutional investors. EVestment has more than 2,000 clients that use its database to analyze 74,000 investment vehicles. The deal will be financed with a mix of cash and debt, Nasdaq said in a release Tuesday.

The acquisition, the first major deal under new Chief Executive Officer Adena Friedman, is a demonstration of Nasdaq’s ramped-up focus on expanding beyond its core business of facilitating stock trades, as the company builds up its data and technology capabilities. About 24 percent of Nasdaq’s second quarter revenue came from its index and data operation, while 37 percent came from helping to arrange trades in financial instruments like equities, options and bonds.

Friedman said on a call with analysts that the purchase is part of a “concerted effort” to branch out and will help the exchange further cozy up to asset managers. EVestment earned $83 million in non-GAAP cash revenue last year, up 38 percent from 2013. Friedman noted that the growth came from finding new clients, increasing sales to existing customers and raising prices.

“From what we’re seeing, we think the investment management industry is going to become a bigger and bigger user of data and technology,” Friedman said in a phone interview following the analyst call.

Data Wars

Friedman added that the exchange has already cemented its ties to brokers and public companies, but wants to sell more data straight to money managers. Some of the material EVestment collects and packages for its customers includes information on fund performance, strategies and portfolio content.

“They make sense of it and serve it up in an analytical format,” Friedman said. “They’re a definitive source.”

Competitors are also zeroing in on the data business as an avenue for growth. In 2015, Intercontinental Exchange Inc., the owner of the New York Stock Exchange, bought data provider IDC for $5.2 billion to expand its own data services business. IDC specializes in pricing corporate bonds.

Nasdaq has a history of expanding through deal-making. The exchange operator has been on an acquisition tear in the past two years, with deals including a $1.1 billion takeover of Deutsche Boerse AG’s options market operator International Securities Exchange and Boardvantage, a business that allows corporate boards to exchange information. These deals were done by Friedman’s predecessor, Bob Griefeld.

When Friedman took over as CEO in January, she put a companywide review in motion. Rich Repetto, an exchange analyst at Sandler O’Neill & Partners LP, believes the deal could mark a small turning point for the exchange operator, amid that review.

“We suspect Nasdaq is signaling a small ‘pivot’ in asset allocation and strategy,” Repetto wrote in a client note. “Nasdaq could be transitioning internal asset and investment allocation to a more ‘team approach’ compared to the prior more ‘silo-ed’ approach used in the past.”

Bloomberg LP, the parent company of Bloomberg News, also sells financial data to clients including money managers.

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