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Sector trends - July 2022: Stock Exchanges/Trading Venues

UK & European Financial Services M&A: Sector trends H2 2021 | H1 2022 — Stock Exchanges/Trading Venues

Insight
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5 min read

Europe's FMI goes digital—data analytics, capital markets solutions, RegTech and DLT-based tech acquisitions feed the steady stream of M&A activity.

 

Overview

Current Market

  • Slight dip in M&A activity, except for Europe's premiere trading venues

We Are Seeing

  • Financial market infrastructure goes digital: 
    • Data drive through acquisitions and equity investments (e.g., Deutsche Börse's acquisition of Kneip and LSE's equity investment in Finbourne) 
    • Capitalising on capital markets (e.g., LSE's minority investment in Floww and Deutsche Börse's minority investment in WeMatch) 
    • Deployment of RegTech solutions (e.g., LSE's acquisition of Global Data Consortium)
    • Increasing comfort with DLT-based technology (e.g., Euroclear's equity investment in Fnality)
  • Cashing out of "liquid" stakes by:
    • Banks (e.g., Sovcombank's disposal of 2.91% of SBP Exchange)
    • Stock exchanges (e.g., Intercontinental Exchange's disposal of 9.85% of Euroclear)

Key Drivers/Challenges

  • Stock exchanges anticipate increasing demand for:
    • Sustainability data (e.g., Euroclear's equity investment in Greenomy)
    • Carbon credits (e.g., Deutsche Börse's equity investment in AirCarbon Exchange)
  • Stock exchanges seek:
    • Scale through horizontal growth (e.g., ATHEX's acquisition of 10.24% of BELEX)
    • Scope through diversification (e.g., SIX's acquisition of Ultumus) 
    • Scope through vertical integration (e.g., LSE's acquisition of Quantile)
    • To leverage new technology to enhance service delivery (e.g., Clearstream's asset management data analytics JV with FNZ) 
  • "Digital era" FMI flex M&A muscle—chasing the holy grail for digital assets:
    • Fully integrated digital asset exchange (e.g., Valereum's acquisition of 90% of GSX)
    • Combine banking with DLT, to offer faster and more cost-effective trading services (e.g., BitMEX's acquisition of Bankhaus von der Heydt)
    • Building transatlantic reach (e.g., Coinbase's acquisition of FairX)
  • Private equity view FMI as technology-enhanced businesses (e.g., Silver Lake's acquisition of 9.85% of Euroclear)

Trends to Watch

  • Stock exchanges compete for ESG data/data analytics providers, as demands from European banks and asset managers increase at an exponential rate

 

Our M&A Forecast

Europe's premier trading venues to continue inorganic growth rally, supported by colossal M&A war chests. However, as trade processing margins compress, vertical integration will become increasingly critical to secure profitability.

 

Data-driven growth

  • London Stock Exchange (Data analytics): Acquisition of MayStreet (May 2022)
  • SIX (Trade repository): Acquisition of 50% of REGIS-TR (April 2022)
  • Deutsche Börse (Data analytics): Acquisition of Kneip (March 2022)
  • London Stock Exchange (Investment data): (Undisclosed) equity investment in Finbourne (October 2021)
  • SIX (Index and ETF data): Acquisition of Ultumus (July 2021)

Horizontal expansion

  • Warsaw Stock Exchange (Stock exchange): Acquisition of 65.03% stake in Armenia Securities Exchange (May 2022)
  • London Stock Exchange (Private capital marketplace): Minority equity investment into Floww (March 2022)
  • Deutsche Börse (Wholesale derivatives platform): Acquisition of minority stake in WeMatch (October 2021)
  • Athens Stock Exchange (Stock exchange): Acquisition of 10.24% of Belgrade Stock Exchange (August 2021)

Tech investments

  • London Stock Exchange (ID verification): Acquisition of Global Data Consortium (April 2022)
  • Euroclear (DLT-based payment-on-chain): Equity investment into Fnality (March 2022)
  • London Stock Exchange (Trading technology): Acquisition of Tora (February 2022)
  • London Stock Exchange (Efficiency optimisation): Acquisition of Quantile Group (December 2021)

Vertical partnerships

  • Clearstream: Data analytics JV with FNZ (April 2022)

ESG investments

  • Deutsche Börse (Carbon credit trading): Equity investment into AirCarbon Exchange (March 2022)
  • Euroclear (ESG compliance): Equity investment in Greenomy (February 2022)

PE firepower

  • Silver Lake: Acquisition of 9.85% of Euroclear (October 2021)

Cashing-out of "liquid" stakes

  • Sovcombank: Disposal of 2.91% of SPB Exchange (October 2021)
  • Intercontinental Exchange: Disposal of 9.85% of Euroclear (October 2021)

Fintechs flex muscle

  • BitMEX: Acquisition of Bankhaus von der Heydt (January 2022)
  • Coinbase: Acquisition of FairX (January 2022)
  • Valereum Blockchain: Acquisition of 90% of Gibraltar Stock Exchange (January 2022)
  • FTX: Participation in US$150 million Series C extension funding round for Chipper Cash (November 2021)

IPOs

  • SPB Exchange: US$175 million SPB Exchange IPO (November 2021)

 

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