A Merger for Mergermarket?


Mergermarket Group, a successful business intelligence research firm covering the M&A, distressed, and debt markets, is being auctioned by Pearson, the parent of the Financial Times which currently owns Mergermarket.   Pearson is reportedly expecting around $500 million from the sale, which would represent a 3.1x revenue multiple and an 11x earnings multiple.

What is Mergermarket?

Founded in 2000, Mergermarket Group offers eleven separately branded research products.  The flagship product, Mergermarket, analyzes pending M&A transactions and maintains a database of historical M&A deals.  Mergermarket successfully leveraged its journalistic and analytic staff to extend its product line into the distressed debt, leveraged finance, asset-backed and infrastructure markets.  It now claims over 800 staff in 65 locations around the world.

Mergermarket has also been smart about creating by-product from its core M&A service, such as Wealthmonitor, which identifies the new wealth being created as a result of M&A transactions and is sold to financial advisors for new business prospecting.

Mergermarket’s revenues are reportedly around £100 million ($162 million).  Mergermarket generates earnings before interest, tax, depreciation and amortisation of £28m ($45 million), according to offering documents.

The sale

Mergermarket was acquired by the Financial Times in 2006 for £101 million ($192 million).  Pearson is reportedly unwilling to accept less than £300 million for property now.  This implies a valuation of around 3x revenues and 10.7x EBITDA.

Pearson announced that the property was for sale in August and hired JPMorgan Cazenove to run the auction.  Around 50 companies and private equity groups including Thomson Reuters and Bloomberg requested the initial offering document.

The first round of the auction was in September, with the goal of completing a transaction by year end.  Final bids are due next Wednesday, right before the U.S. celebration of Thanksgiving.

Sky News reported that the parent of Fitch Ratings is one of the bidders for Mergermarket, along with private equity firms BC Partners and Warburg Pincus, which has hired Caspar Hobbs, Mergermarket’s founder.

Advance Publications, the owner of Conde Nast, was reported to have made an offer although it was uncertain whether it remained in the auction.


It is easy to see Mergermarket’s attraction for Fitch.  Its direct competitors have diversified research products which are distinct from the core credit rating offerings.  Standard & Poor’s acquisition of Capital IQ in 2003, although seemingly pricey at the time, has revitalized its information products.  Moody’s has been less aggressive, but did acquire Economy.com in 2005.

Fitch has built a risk analytics group, primarily through its 2005 acquisition of Algorithmics for $175 million, but has limited information offerings.  Fitch is jointly-owned by Hearst and Fimalac, a French financial services holding company.

For Pearson, the sale seems to be an adjustment to its business portfolio.  John Fallon, Pearson’s chief executive, judged the division to be non-core.  In July, Pearson merged its Penguin publishing unit with Bertelsmann’s Random House to create a company with 53% Bertelsmann holding and 47% Pearson holding.  There has been speculation that the FT itself is to be sold although Pearson has denied it.

The Financial Times also owns Medley Global Advisors, a political intelligence provider.

Finally, we wonder about a small compliance-related aspect of the Mergermarket sale. Mergermarket positions itself as a source of non-public information on mergers and acquisitions:

“The insight you’ll gain from Mergermarket often doesn’t become public knowledge until 6-24 months after our journalists first report on it, giving you a large window of opportunity to take early action.”

Given the heightened insider trading concerns in the U.S., what sort of compliance risk might a potential purchaser be taking on?


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