New York, NY – In recent weeks, rumors have been swirling in the financial markets that Standard & Poors has hired an investment banker to find a buyer for expert network subsidiary, Vista Research. We heard that last week this rumor was confirmed in an article published by the Wall Street Letter, as S&P has purportedly retained Citigroup to sell the business.
While we have not spoken with Vista or S&P management on this topic, it is clear to us that one potential reason that S&P might be trying to sell the business at this time is the legal and reputational risk associated with owning Vista in the wake of investigations by the New York Attorney General and the US Attorney’s Office.
We could also make the argument that S&P might be taking this opportunity to sell Vista given the success of the business since it was purchased in 2005. Sources indicate that Vista has posted extremely healthy revenue growth in the past few years. If this is true, then we would not be surprised if S&P could actually profit from a sale of Vista at this time.
It is a little difficult to ascertain what a firm like Vista might sell for in the current market environment, as a buyer would have to take into consideration the potential legal risk. However, it is clear that both mutual fund and hedge fund investors have expressed extreme interest in expert network services over the past few years.
Given the interest shown by hedge funds in expert networks, we would not be surprised if Wall Street investment banks were willing to consider purchasing Vista Research. Market sources indicate that a few bulge bracket firms showed considerable interest in Gerson Lehrman Group when it was for sale a few years ago.
In fact, the demand of buy-side investors for expert networks prompted Bear Stearns to develop their own expert network called Primary Insight a few years ago. Goldman Sachs is also rumored to be looking into building its own expert network to better serve its hedge fund clientele.
Based on our analysis, the size of the expert network business has topped $300 million in annual revenue. However, this belies the actual buy-side interest in this segment of the alternative research space. In fact, we suspect that expert networks have experienced robust growith in recent years, in line with the explosive growth seen in the hedge fund industry.