Euromoney: data is the lure for acquirers, not derring-do

Euromoney Institutional Investor says its mission is to provide clarity in opaque markets. Ironically, the value of the FTSE 250-listed company had itself become obscured.

Shares in the business-to-business media group jumped on Monday after two private equity groups made a £1.6bn buyout approach. The rise in market value of nearly 50 per cent since the start of the year points to previous market mispricing.

Some investors may be unaware that the eponymous publication — launched to cover the buccaneering Euromarkets in 1969 — now accounts for a tiny share of revenues. The core business is selling data to customers working in commodities, professional services and asset management. It also runs events. These generate a quarter of its sales.

The possible cash offer of £14.61 put forward by Paris-based Astorg and London-based Epiris represents a 46 per cent premium to Euromoney’s three-month average. It is within 3 per cent of a September 2019 high.

Investors will be tempted to accept. The enterprise value to ebitda take-out multiple of 16 times is nearly 50 per cent higher than the stock’s long-term average. It is a similar valuation to that paid by News Corp for OPIS, a peer to Euromoney’s fast-growing commodity data provider Fastmarkets, in a $1.15bn deal last year.

The company has been going through a rough patch. Underlying revenue shrank by an average of 2 per cent between 2014 and 2021. Nonetheless it is an attractive deal for the private equity firms. The company is well placed for recovery. Events, hard hit by the pandemic, have bounced back. Half-year sales were up by nearly two-thirds year on year.

Management itself predicts “high single to double-digit” annual sales growth, and a corresponding rise in margins. If group ebitda margins rise by five percentage points over the next five years the purchasers would reap a 22 per cent annualised return on investment at exit, under standard buyout assumptions.

With 70 per cent of sales coming from subscriptions, there is a strong, stable cash flow to service debt. Given the buyout sector’s copious dry powder, and the relative underpricing of the UK stock market, it is no surprise that Euromoney is an attractive target.