This week has been a big week for Markit. After the announcement of the merger between Markit and IHS, the financial information service provider has partnered with FinTech Sandbox, a non-profit organisation that helps fintech startups access data.
Ed Chidsey, global head of pricing and reference data at Markit, highlighted that fintech is an industry that data companies need to enter and be supported within. “We strongly believe that our support of entrepreneurs in the vibrant global fintech community will benefit the industry overall,” Chidsey said.
Executive director of FinTech Sandbox, Jean Donnelly, agreed with this sentiment. “Access to the breadth and depth of Markit’s data will give startups in our program a significant boost in creating and developing products to meet the rigorous standards of large financial institutions.”
Earlier this week, it was announced that Markit and IHS would merge to become IHS Markit, a potential global leader in analytics and solutions, for $13 billion. The larger American headquarters will move to London, while key operations will remain in Colorado with the aim to cut $125 million from costs by 2019.
“This transformational merger brings together two information-rich companies to create a powerful provider of unique business intelligence, data and analytics to a broad and complementary customer base,” Jerre Stead, IHS chairman and CEO said.
According to the Guardian, Markit’s shares were up by 6.8% at $31.50 in premarket trading at the start of this week and shares have risen about 23% since the company went public in 2014. However, IHS’s shares, which were previously at a three year low of $92.90 last month, rose up 3.9% at $115.
Tax inversion deals have become a debatable and political subject in the US due to the loss of tax revenue for the government, and London has been an attractive location for deals such as these to take place.
Bernie Sanders, Democratic presidential candidate recently encouraged the US Treasury department to impose new tax rules that would make mergers like this more expensive. “Large multinational corporations should not be able to avoid paying US taxes when children in America go hungry,” Sanders wrote in a letter sent last week to Treasury Secretary Jack Lew.
Markit was founded in 2003 by Lance Uggla, a former credit trader in London and he will remain president of Markit, but will take over Jerre Stead’s top position after he retires at the end of next year. However, with the excitement of this new deal, it must not be forgotten that risk is still prevalent.
Paul Ginocchio, an analyst at Deutsche Bank, has some doubts about the merger and said that if IHS Markit becomes too diversified, it will hurt the growth of existing products. “We worry that in 3 years when the merger benefits are realised, the increased scope of the products being sold to the larger client list will dilute the sales focus.
“The significant diversification from this merger could potentially harm long-term organic revenue growth versus maintaining or accelerating it, leading to the need to make disposals,” Ginocchio said, according to Benzinga.