The agreement came less than a year after a consortium led by Blackstone, together with Canada Pension Plan Investment Board and GIC, completed a partnership deal with Thomson Reuters for the latter firm’s Financial & Risk business, which was subsequently rebranded as Refinitiv. That consortium owned 55 per cent of the equity in Refinitiv, and Thomson Reuters kept the remaining 45 per cent stake. And now LSEG is to take this organization over. It has been a hectic 12 months.

Refinitiv will be familiar to wealth managers for offerings such as its Eikon range of capabilities that cover cross-asset data and news, analytics and reporting tools. Another of its offerings is Compliance Management, a solution on its Connected Risk platform.

The London Stock Exchange Group takeover will give Refinitiv cash to finance development, which should be broadly positive for users such as banks and wealth managers, analysts said. The agreement also turns up the heat on rival vendors such as Bloomberg. Rising competition comes at a time when cost pressures are all too often upwards, partly due to rising regulatory loads stemming from laws such as Europe’s MiFID II or Dodd-Frank in the US.

The rise of digital wealth management platforms and a trend towards industrialization of parts of the value chain - means that tech firms are keen to grab as large a chunk of the terrain as they can. Digital advances in wealth management create a need to process data more efficiently than ever before.

Firms such as SS&C Technologies and Avaloq, to name just two, are driving hard to win markets and are becoming the go-to organizations that wealth managers want to use. It is still a crowded field but some consolidation is under way. A few weeks ago fintech specialist FNZ Group bought wealth management technology provider JHC. In 2018 FNZ also agreed to acquire German investment platform ebase from Commerzbank, showing the importance of Europe’s largest economy to its thinking about business strategy.

Private equity big-hitter Warburg Pincus, which has ownership stakes in a variety of financial firms, has a big stake in Switzerland’s Avaloq. In the case of US-based SS&C, it bought wealth management software firm Advent in early 2015 in a $2.7 billion cash deal.   And another deal of note was that of Anglo-US investment firm Motive Partners, with its purchase of Finantix in 2018. Yet another deal worth mentioning in this context was wealth industry software company IRESS's acquisition of a strategic equity stake in regulatory technology firm Lucsan – that transaction showed how data analytics is becoming more important for firms handling rising compliance workloads. This year, IRESS bought QuantHouse, an international provider of market data and trading infrastructure, for a price of up to €38.9 million .

So what to make of the LSEG/Refinitiv transaction?

“The data angle has been widely noted, and is accretive for both sides. From the LSEG perspective, the deal represents a direct route into the burgeoning retail wealth market, with Refinitiv and its platforms like ThomsonOne, Eikon and Beta as the tech chassis. To Refinitiv, the cash will fund tune-ups of these platforms as well as investment in hot areas like the graph technology and AI,” Will Trout, head of wealth management at consultancy firm Celent, told this publication.

As LSEG’s own press announcement last week said, Refinitiv’s market data, analytics and execution capabilities cut across asset classes and focus on four main customer segments: trading, investment and advisory, wealth, and risk management. Refinitiv provides company, economic, deal, pricing and reference data, real-time data and desktop analytics.

Wealth managers paying for data will be wary of any fee increases, and will hope that the latest M&A deal strengthens rather than weakens competition. A fortnight ago, the European Securities and Markets Authority said that the MiFID II regulations on financial services have not done enough to improve clarity and competition over pricing, and it is consulting the industry about market data fees.

“I note the article states that some firms have called on ESMA to review market data fees. I would echo that. My main concern is with how aggressively the exchanges and index providers pursue commercial terms once they have acquired data sources. It is already expensive for wealth managers to use the pricing, index and analytical data they require for investment reporting, and any move to further increase costs will not be met happily,” a senior figure in the UK’s wealth and technology sector told this publication.

Taking a more enthusiastic line on the deal is Daniel Connell, who is managing director, Market Structure and Technology at Greenwich Associates in the US. “I think this merger would benefit the overall market as it creates another broad provider of market data solutions. LSEG is clearly committed to data and data analytics businesses. Combining the strength of the Refinitiv core data sets and technology with the Index and data services of LSEG can produce a stronger set of content and solutions from a single source.”

“I don’t see much in the way of streamlining of products and solutions from the combined entity. I think they are quite complimentary, actually. Where I do see streamlining is in the user experience, as they can now access products across a spectrum of solutions from a single source where things like common identifiers will make for an easier integration process,” he said.

Refinitiv is a global business. Its sponsorship for this publication’s recent Asia awards event in Singapore and upcoming MENA Awards in Dubai in November for example, shows its drive to build a global footprint.

Growth
LSEG said the combined group is targeting a revenue compound annual growth rate of 5 to 7 per cent over the first three years after the deal is complete. It is also going after annual run-rate cost synergies in more than of £350 million by the end of year five after the acquisition is completed, with “significant additional benefits from refinancing Refinitiv’s existing debt”. The enlarged business will be chaired by Don Robert, LSEG’s chairman, and led by David Schwimmer as chief executive, with David Warren as chief financial officer.

David Craig will join LSEG’s executive committee and continue as chief executive officer of Refinitiv.