Financial institutions M&A sector trends: stock exchanges/clearing houses/trading venues — H2 2019 and outlook for 2020

The search for the world's premier listing venue continues—could data aggregation and analytics set competitors apart?

Overview

CURRENT MARKET

• Consistent; high activity levels

WE ARE SEEING

• Inorganic strategies:
  • Horizontal expansion (e.g., Euronext's acquisitions of Oslo Børs and 66% of Nord Pool)
  • Cooperation arrangements (e.g., Astana International Exchange's central securities JV with Nasdaq)
  • Vertical integration, with a particular focus on data aggregation and analytics (e.g., LSE's acquisition of Refinitiv and Moody's acquisition of RiskFirst)
  • Gas in the tank—IPOs (e.g., Tel Aviv Stock Exchange's 700 million shekels IPO)

KEY DRIVERS/ CHALLENGES

• Building international scale—Asia in-bound (e.g., HKEX's rebuffed bid for LSE)
• Domestic consolidation (e.g., Tradegate Exchange's acquisition of Börse Berlin)
• Impact of digitalisation:
  • Banks and fintechs offering trading venues in competition with 'traditional' exchanges—exchanges have turned to financial data as the new battle ground
  • Cautious acceptance of digital asset trading (e.g., Intercontinental Exchange's launch of bitcoin futures trading)
  • Need for digital asset custody solutions (e.g., Euronext's acquisition of 23.5% of Tokeny Solutions)
• Growing confidence in outsourcing solutions (e.g., cloud services provided by Google to Deutsche Börse)

TRENDS TO WATCH

• Nationalistic attitudes and perceived market foreclosure apprehensions continuing to hinder mega deals (e.g., new Italian laws requiring potential bidders for Borsa Italiana to notify the Italian government of acquisition plans)
• Possibility of smaller regional and domestic consolidation deals
• Increasing regulatory scrutiny of pros vs. cons of concentration of information in the hands of the few

OUR M&A FORECAST

M&A to achieve scale is still high on agendas of many European exchanges. However, HKEX's rebuffed bid for LSE highlights the reluctance of shareholders to risk a high-profile aborted deal (regardless of promised benefits and synergies).

Publicly reported deals & situations

Inorganic growth

Deal highlight:

White & Case represented Tradegate Exchange and its shareholders, Deutsche Börse and Tradegate Wertpapierhandelsbank, on the acquisition of Börse Berlin

Acquisitions:

• Cboe Global Markets: Acquisition of EuroCCP (December 2019)
• Euronext: Acquisition of 66% of Nord Pool (December 2019)
• Deutsche Börse: Acquisition of Nasdaq's NFX (November 2019)
• Tradegate Exchange: Acquisition of Börse Berlin (October 2019)
• Hong Kong Exchanges and Clearing: Bid for London Stock Exchange (September 2019)
• Johannesburg Stock Exchange: Acquisition of 74.85% of Link Market Services South Africa (August 2019)
• Euronext: Acquisition of 19.8% and 10% of Oslo Børs from DNB and KLP, respectively (June 2019)

IPOs:

• Tel Aviv Stock Exchange: 700m shekels IPO on TASE (July 2019)

Horizontal cooperation:

• Astana International Exchange: Central securities JV with Nasdaq Dubai (July 2019)
• Albanian Securities Exchange and Vienna Stock Exchange: Market data distribution JV (June 2019)

The new battle ground— financial data

Organic:

• Deutsche Börse: Launch of Qontigo (September 2019)

Inorganic:

• Luxembourg Stock Exchange: Acquisition of 10% of Origin (December 2019)
• Moody's: Acquisition of RiskFirst (July 2019)
• Equistone Partners Europe: Acquisition of Moody's Analytics Knowledge Services business (July 2019)
• London Stock Exchange: Acquisition of Refinitiv (July 2019)
• Refinitiv: Data access JV with BattleFin (June 2019)

Digital world demands— outsourcings and bolt-ons

• Deutsche Börse (Cloud solutions): Outsourced cloud services by Google (September 2019)
• Euronext (Digital asset custody): Acquisition of 23.5% of Tokeny Solutions (July 2019)

Protectionism interferes with deal-making

• Borsa Istanbul: Acquisition of 10% of Borsa Istanbul by Turkish Wealth Fund (December 2019)
• Shanghai Stock Exchange: China's suspension of the Shanghai-London Stock Connect scheme (December 2019)
• Warsaw Stock Exchange: Rumoured interest in Bratislava Stock Exchange (September 2019)
• Borsa Italiana: New Italian law requiring foreign potential bidders to notify the Italian government of any acquisition plans (September 2019)

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