THE DEAL STRATEGY
Any takeover should automatically generate the question ‘What is the strategic rationale for the deal?’ The recently announced Quodd acquisition of Xignite certainly merits the enquiry for those involved in the market data world because this deal could be the benchmark indicator to M&A trends in 2023.
According to Crunchbase, Xignite attracted funding of $37.6 Million including Nikkei and Quick’s joint participation in 2016’s Series C offering.
For me, Xignite has always been a market data vendor searching for a standout niche. Most notably there was the attempt to come up with alternative pricing models for market data, something which has alluded everyone so far, then the embracing of The Cloud, and on to its current iteration as a Data Mall. The problem Quodd may find is that Xignite has little unique content of its own so is competing primarily on price.
Despite the heavy emphasis on Cloud in the PR Releases, I can’t see this being a Tech play. Xignite relies partially on Vela (now Exegy) technology which is not Cloud native, and besides Quodd has its own Cloud Infrastructure. If the Cloud is an integral element to driving the deal this means Xignite’s attraction must be more related to content, its data inventory and associated accessibility via the Cloud, the 500+ APIs.
Yet the give away is in the PR title ‘QUODD Acquires Xignite to Capture Larger Portion of Cloud-Native Market Data Industry’
MOTIVATION: A DASH FOR MARKET SHARE
This deal is a good old fashioned push for market share, an intent Quodd demonstrated when bringing onboard industry heavyweight Michael Markes as VP late in 2022. Both companies overlap in global equity markets coverage, yet are relatively weak in OTC markets, though to be fair everyone is when compared to either Bloomberg or Refinitiv. The ultimate driver is likely Xignite’s client base and existing revenue stream which is probably more diverse and with a larger overseas presence (including an office in Shanghai) than US-centric Quodd.
In addition, Market Data Guru has already highlighted the potential in opening up new frontier markets like wealth management, retail market financial advisory and data processing, areas which are receptive to Cloud accessibility. With these markets coming into play, grabbing market share has a certain logic given where Quodd places itself in the marketplace.
This narrative fits in well with momentum being built by Big Tech partnering with the global Exchange groups because it places a premium on maximising content volume delivery via the Cloud and gaining a competitive edge in terms of establishing a wider client base. Where it differentiates significantly is Big Tech’s focus on value added services something neither really Quodd nor Xignite offers.
In the context of the market data industry overall, this deal seems to fit Joseph Stalin’s maxim, ‘Quantity has a quality of its own’.
Keiren Harris 26 February 2023
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