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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