DEUTSCHE BOERSE BUY SIDE DATA STRATEGY $4.3BN FOR SIMCORP
THE DEAL STRATEGY
The deal aligns along a developing 2 prong strategy for Deutsche Börse strategy to:
1.Target services and solutions for the Buy Side, and,
2.Increase presence in providing data, analytics and solutions that fit into a Cloud Strategy building on the Google partnership.
The business logic addresses where Deutsche Börse is relatively weak compared to ICE, LSEG/Refinitiv and NASDAQ, also CBOE. This is the current lack of solutions for Portfolio Management & Trading, Performance & Risk Management, Operations, Administration and Accounting. These are all areas where SIMcorp has presence. As an added bonus SIMcorp also offers ESG investing solutions.
Outside the Hedge Funds the Buy Side has been relatively late to automation, is more data inefficient, with significantly higher costs than the Sell Side both for information sourcing and operational workflow. These issues all present opportunities.
The fact Deutsche Börse is willing to pay $4.3 Billion highlights the importance of offering data, analytics, and solutions across the entire workflow spectrum. The business itself generated $624 Million (€561 Million) with a Price/Sales Ratio of 6.9 (DBAG’s own on 31/03/2023 was 7.1)
TheTrade provides a good synopsis here and reported on the deal that created the relationship
MOTIVATION: BUILDING BUY SIDE WORKFLOWS
Deutsche Börse has been actively engaging the buy side space for some time through the purchase of Institutional Shareholder Services (ISS), and in 2022 acquiring Luxembourg based fund information Kneip. The latter deal is instructive about Deutsche Börse’s potential plans to incorporate SIMcorp.
In January 2023 Kneip became the sole provider of fund information to Deutsche Börse’s Clearstream Fund Centre and its distribution capabilities with the intention of creating a ‘one stop shop’ for funds that provides services to distributors and asset managers based on 3 workflow levels, 1. Data 2. Distribution and 3. Execution. Kneip also owns Dataglide a UK tech company specialising in data transformation and cloud based automation, which will inevitably be leveraged for the drive to get Deutsche Börse’s information solutions into the Google Cloud.
SIMCorp now adds the fourth level, i.e. solutions and analytics know-how. It deepens the ‘one stop shop’, by increasing the solutions that can be included in the Cloud partnership, yet simultaneously offering standalone services.
SUMMARY
The SIMcorp acquisition is representative of the snowballing push by the largest global exchanges to become integrated data, analytics and solutions providers where trading on their own venue becomes just one possible outcome of the workflows offered.
Deutsche Börse strengthens its presence at the solutions end of the workflow and as the Kneip example demonstrates, shows the potential for complementary services to raise incremental value, i.e. revenue.
The lack of horizontal opportunities in the venue space is accelerating the path towards vertical integration for Deutsche Börse (and other exchanges).
Keiren Harris 02 May 2023
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