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Animal spirits logic

5 November 2014 By Quentin Webb

In a gold rush, it pays to sell the shovels. Carlyle, the U.S.-based private equity firm, is teaming up with British publisher Euromoney to test the adage for the modern era. With stock sales, debt issuance and M&A booming, they’re acquiring Dealogic, a seller of financial data, for $700 million.

It’s a sale worthy of the times. The company’s founders, who grew frustrated by thin trading and a low valuation, delisted Dealogic from London’s junior market three years ago. Under the terms of Wednesday’s deal, they’re being paid 10.5 times last year’s EBITDA of about $67 million.

It’s a rich multiple by the general standards of the buyout industry. On the other hand, the buyers aren’t paying a premium compared to other fixtures of finance. Newly listed Markit fetches 10.3 times trailing EBITDA while FactSet commands a multiple of 15.8 times, according to Starmine.

Crunching such numbers is also Dealogic’s speciality. Bankers depend on the company for pitch-books and analysis on transactions of all stripes. It’s a sweet spot, even as other banking businesses, like bond and commodity trading, face tougher times.

Recent figures from Breakingviews parent company Thomson Reuters, a Dealogic competitor, show the bond boom holding up, with global debt sales up 2 percent to $4.9 trillion this year. M&A has surged 47 percent to $2.8 trillion and initial public offerings are up 59 percent to $195 billion.

Adding to Dealogic’s appeal is its healthy EBITDA margin of 43 percent, on a par with its closest rivals. Moreover, cash flows have been predictable, thanks to the long-term, multimillion-dollar subscriptions it sells to investment banks. That should insulate the company somewhat from future fluctuations, though a fresh downturn would present a challenge.

As investors pan for returns amid richly valued IPOs, low-yielding bonds or bold strategic M&A, Carlyle’s latest buyout doesn’t depend on the outcome of the transactions themselves. Either way, dealmakers will need Dealogic’s tools.


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