With no shortage of major events taking place this year, a dozen key announcements rose to the top as having far-reaching implications for the data, information, and analytics industry. What do they mean? Here’s how to get ready for 2020.
Against the backdrop of Brexit, an impeachment coupled with a US presidential election, populist dissent, and trade tensions galore, we enter the holiday season reflecting on the year’s major news and why it matters. We’ve chosen these 12 announcements, listed in no particular order, because of what they portend as we head into a new year and a new decade.
Announcement 1: IBM’s Divestiture of Its Watson Marketing Portfolio to Centerbridge Partners
In a single event, we learned two important lessons: that sophisticated AI technology isn’t the end-all but rather the beginning of a path to value creation; and that private equity continues to roll up the world as it sits on $2 trillion in dry capital, an amount larger than Canada’s GDP. There were dozens of PE deals this year, and their influence will keep a steady hand on the tiller of our industry for years to come. That’s only one part of this story, though. The other points to continued lessons learned about roll-ups and roll-outs and the failed promise of AI if not looked at realistically. Billions are at stake — and so is shareholder value.
Announcement 2: S&P Global’s Acquisition of 451 Research
The acquisition of an IT research firm by a financial data provider demonstrates how our market continues to converge in interesting ways as companies struggle with their identities in the realm of big platform and consolidation while the internet and modern computing continue to tear down silos and walls. On paper, the deal touts a differentiated approach to financial data that will layer in emerging IT insight. However, we suspect that the reality will be more about a heightened focus on unique data, which 451 Research brings in the form of its M&A database containing details on nearly 60,000 deals.
This deal not only shows the value of data but also whether there is true synergy or not. We remember when then S&P parent McGraw-Hill bought JD Power under the auspices of being a “rankings company” only to be spun out as part of the breakup.
Announcement 3: Schlumberger, Chevron, and Microsoft Announce Collaboration to Accelerate Digital Transformation
Along with convergence, we’re seeing emerging bedfellows in this announcement, which shows industry value chain cohorts becoming partners to make data more consumable, usable, and ready for decision-making. New, non-traditional information vendor logos are growing in relevance in our industry. Microsoft, as a part of this deal, is an important barometer to watch as it continues to add data capabilities to its cloud stack and takes a vertical industry orientation. Microsoft “gets this” — unlike Google or Amazon, which didn’t grow up with deep enterprise understanding.
Announcement 4: Big Pharma Leverages Sharing Mindset to Promote Drug Discovery with AI
This deal is another example of the adage “if you can’t beat them, join them” and illustrates the new sorts of partnerships emerging. It shows again that to serve an industry, the data required to plan, analyze, and enrich today’s user experiences, applications, and platforms is inherently biased; it is bound by the limitations of the data that an individual provider collects and manages. As commercial enterprises join forces with data, information, and analytics providers, data takes on new heightened forms of contextual relevance that far exceed what any single provider could produce on its own. This announcement, like the one before, is a harbinger of things to come.
Announcement 5: Thomson Reuters Acquires HighQ
In July, Thomson Reuters announced the acquisition of HighQ, a collaboration platform for the legal and regulatory market. The acquisition fills a key missing piece in Thomson Reuters’ legal division’s platform strategy and was the most significant acquisition since it gained access to its multi-billion-dollar investment fund.
Companies have bought and sold firms all year — all decade, really — on the promise of focused scale and the ability to invest in that focus. As Thomson Reuters became a fraction of itself over more than a decade, selling off Cengage, Truven, Clarivate, and Refinitiv, it became essential for what was left to start putting those dollars to use and prove the thesis that less is more in our industry these days.
Announcement 6: A New EU Open Data and PSI Directive
Updated legislation in the EU will make large datasets held by the public sector, such as those containing meteorological and environment data, more quickly and easily available for creating new products and services. The Open Data Directive will lay down minimum standards for open access throughout the EU, and member states must transpose it by July 16, 2021.
This announcement paints a future where more data is publicly available, ready to be harvested, normalized, made smart, and put into applications globally. It also falls on the heels of an open movement in STM and pressure on legal information providers and the standards sector, which also face pressure from the movement. It is not going away and will continue to put pressure on business models while creating new monetization opportunities for those who focus on the future.
Announcement 7: The London Stock Exchange Group (LSEG) Buying Refinitiv
This acquisition creates the largest listed global financial market infrastructure and data provider by revenue. More importantly, the proposed $27 billion, all-share acquisition of Refinitiv points to a greater implication for the data, information, and analytics industry at large: Wall Street appears to be willing to accept any price for a compelling data story. Valuations remain crazy hot for anything that sits on vast troves of data and can operate in emerging data marketplaces and other dominant markets where financial services leads innovation that reshapes our industry.
Announcement 8: IHS Markit and Informa Swap Business Units
Informa got most of IHS Markit’s Technology, Media and Telecoms (TMT) intelligence business, and IHS got Informa’s Agribusiness Intelligence group. This was an innovative way for both companies to double down on key verticals, though both must still work to align the new businesses. Again, this speaks to the importance of doubling down on focused scale and unique partnerships, in this case, with an M&A swap that — just like other transactions discussed above — shows that where there’s a will, there’s a way for unique deal structures.
Announcement 9: EDP Sciences Joins Forces with the Chinese Academy of Sciences
The deal in May for the sale of the French EDP journals to China’s Science Press concluded in November. Science Press is the publishing arm of the China Academy of Sciences, the world’s largest scientific research institute. EDP was the publishing outlet of leading French professional societies, is around 100 years old and had reported difficulty in sustaining its journals program.
The deal was only worth $13.6 million — too small to raise regulator eyebrows — but it shows that China is now anxious to open up gateways to global science publishing and much can be done with professional society publishers having difficulties with open access. This is ground-breaking as China seeks to be on the world stage in scholarly publishing and spread its influence in discovery outside its core market. This will happen, and at some point, we expect EU and US regulatory authorities to show up when the deals get bigger.
Announcement 10: The Planned Merger of Cengage and McGraw-Hill Education
Here again, the name of the game is beat them or join them, but at the end of the day, private equity always gets its way. This deal not only reflects the difficult times that US higher education publishers are going through — at least those focused on introductory textbooks — it also shows that the move to digital in this market hasn’t been easy. All players are struggling to deliver and prove the impact and efficacy of their digital solutions while having to operate in a hybrid market with ongoing threats from second-hand sales.
Cengage was saddled with debt, and McGraw-Hill had persistent revenue declines — both were trying to innovate but were not fast enough for market dynamics. Once past the Justice Department, there’s no doubt it’ll be an ugly cost-play for the first several years; by then, we’ll wonder whether these companies will be shells of their former selves. With CEO Michael Hansen at the helm, we are optimistic, but the lesson here is that private equity will always find its exit, even if it is through unconventional means.
Announcement 11: Skillsoft’s Launch of Aspire Pathways
Skillsoft’s focus on the practical application of its lifelong learning strategy provides a valuable lesson not just for its competitors but more broadly for information providers across all sectors. Rather than paying lip service to the concept of lifelong learning, Skillsoft has identified what the concept means in practice for its end users, along with ways it can support their needs in this area. In reality, any information provider is informing, teaching, and keeping knowledge fresh. This is an important lesson for any company in our industry: Whomever we serve — whatever professional in whatever workflow — they are lifelong learners, and we can treat them that way as we think more holistically about our offerings.
Announcement 12: Acquisitions by Endeavor Business Media
This announcement keeps the debate about portfolio vs. focused scale alive and well. Endeavor bought 30+ former Penton and UBM brands from Informa just nine months after acquiring 20+ former PennWell brands from Clarion Events. Seemingly overnight, this brings the company to 600 employees and 80+ brands, including 59 live events and a multitude of marketing services solutions. After starting from scratch less than two years ago, and through some eight acquisitions, Endeavor has catapulted itself into a position as a substantial B2B media player.
As with Ascential, which is building ground and transforming itself in certain categories through M&A and divestiture, deals can create new companies overnight. DTN is another such player in its realm, but proving scale in an eclectic portfolio isn’t easy, and the company will have to focus its verticals and integrate the acquired operations into a common marketing services platform to operate from a position of strength. The way this plays out will hold important lessons about portfolio management in modern information businesses.
Why This Matters
Everywhere we turn, companies are continuing to reshape themselves, building new partnerships and shedding, buying, or exchanging assets. D&B went private, and Cision is doing so as well. Nielsen is breaking into two. DiscoverOrg bought Zoom, and D&B bought Lattice Engines. SAI Global bought its way into being one of the largest players at risk.
The deals in this industry just keep on coming, which speaks to the power of M&A that makes our industry tick, now increasingly blended with new forms of partnerships. It also speaks to the ebb and flow of conglomerate to focused scale as that pendulum continues to swing.
The story of 2019 is about the deal. It’s a harbinger of the status quo — deals have always fueled our industry — but ever more so, the acceleration of the need for deals in order to grow. We see this gaining speed as organic growth becomes harder and harder to find while budgets grow 2–3% and price increases slog it out for 4–5%, or companies find themselves with gaping holes in their portfolios as they seek to gain share of wallet and workflow. M&A and partnerships fill the gap, and this was the lesson of 2019. It also speaks to the power of private equity fueling that engine and its importance as owner in our industry.
Indeed, it’s all about growth, and what 2019 tells us is that companies are getting more aggressive in their pursuit of it and ever more creative as new bedfellows emerge. With all the PE owners out there, we also anticipate that cost-cutting will become a major theme as economic cycles wane. We see 2020 as a year with a heightened sense of energy and urgency to get margins up, platforms done, and deals completed before the economy turns.
Along the way, valuations will remain hot for data, analytics, and subscription-based businesses that combine them or have something unique in the marketplace. With so much “dry powder” and a relatively stable and persistent economy, the money men and women have more work to do, and there’s opportunity galore for those who want to continue to shape their portfolios and grow.
Meanwhile, we can’t forget the customer. Elsevier and Carnegie Melon reached an open access agreement, and so did Springer Nature and Projekt DEAL. It’s never great to reach a stalemate with customers, and it’s nice to see tensions breathe, given the tight growth our industry faces. We have to keep organic growth on the rails, or it puts more pressure on M&A.
However, make no mistake: 2019 was about the deal — to gain portfolio strength, scale, market share, and, ultimately, any number of flavors for driving growth. At the end of the day, this year, it’s about growth. The march for it continues in 2020, making the importance of “smart money” ever more critical as PE shapes the industry to get what it wants no matter what.
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