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Should Factset go Horizontal?
Matt Ober
August 05, 2024
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Should Factset go horizontal? Factset is one of my favorite public companies. A great business selling into the financial services space. If you work at a bank or hedge fund you know the business well. An excellent terminal with fundamentals data, a great multi-asset risk system, and endless datasets for alpha hunting or for building your core investment firm. They have made acquisitions over time but have never been a serial acquirer. One of my favorite acquisitions they made many years ago was Revere data. Revere had built classifications for global stocks, product segmentation and some amazing supply chain datasets. I hear this data is now vital to their index business.
What if Factset went horizontal? Markit did this when they bought IHS. Factset could buy GlobalData in the UK or something smaller like Aggregate Intelligence. Or maybe they pick up some smaller players for insights into commodities markets. If Factset acquires datasets that are more industry focused does this change their opportunity in a good or bad way? One could argue if they buy more sector-specific data and insights they not only pick up industry-specific corporations but they can also cross-sell this to banks, hedge funds, and financial institutions. For example, if they buy Aggregate Intelligence- they get insights on Air Travel, Hospitality, Rental Cars, RV Parks, and Storage Units. The data for all these industries are used by investors to make better-informed decisions. If you invest in the storage unit space, you definitely look at the public company $PSA. In the Rental Car space, the data would be interesting to both equity and debt investors.
Maybe Aggregate Intelligence is too small with not enough revenue. Fair. But maybe it’s also a way to dip your toes in the water. See how much you can grow revenue and cross-sell. Maybe Factset doesn’t want to own industry-specific datasets because it takes their eye off the ball of building more and more into the financial institutions. Maybe they want to go deeper in the vertical they know so well.
If Factset doesn’t want to go industry-specific or horizontal on acquisitions, maybe the move is to expand where they are comfortable. Wealth management, trading, private markets insights, fixed income analytics, FX trading, etc etc. etc.
My opinion- do both. Go horizontal and continue to go deeper into financial markets. The best part of selling to investors across the financial industry is they love data. Industrial analysts want industrials insights from industrial-focused data vendors. Healthcare analysts want deep insights into healthcare companies from healthcare-focused vendors. The list goes on and on.
So horizontal or vertical? I say both. But the time is now. Data is valuable and is getting more valuable by the day. Factset has the customers, the distribution, and an opportunity to really grow over the next 5 years. The question is- what is their next move………
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