Deutsche Börse Hunts for M&A Deal
Deutsche Börse is looking for mergers to grow in certain asset classes, particularly since the German exchange operator failed to acquire FXAll, the foreign exchange trading venue.
Theodor Weimer, chief executive of Deutsche Börse, said in the exchange’s third quarter results call today that its M&A strategy was unchanged as it wants to increase scale in certain asset classes.
“We constantly screen M&A opportunities and we are not getting tired of it,” added Weimer. “We will stick to the areas we have communicated with data as a high priority and also foreign exchange, although there are limited targets.”
The firm is also looking for potential deals in commodities, post-trade and fixed income. “We will stick to our financial discipline and will not do a transaction at any price,” he said.
The German exchange had been in discussions with Refinitiv about potentially purchasing FXAll before the London Stock Exchange Group acquired the data provider.
In contrast, Deutsche Börse last month completed the acquisition of Axioma, which provides software for enterprise risk management, portfolio construction, and regulatory reporting. Following the completion, Deutsche Börse combined Axioma with its index and analytics businesses to form a new company, Qontigo.
— Deutsche Börse Group (@DeutscheBoerse) September 24, 2019
Weimer said: “Qontigo has increased access to the buy side for the whole group and allows us to grow inorganically in analytics.”
He continued that Qontigo enables the group to address current trends in asset management including the growth of passive investing and smart beta; the need for technology infrastructure to achieve efficiency and scale; and the transition towards customization of investment solutions.
Weimer added that the London Stock Exchange Group’s acquisition of Refinitiv changes the chessboard for all the players in the exchange sector.
“LSEG will be busy with Refintiv for next couple of years and the CME is busy with NEX,” he added. “Competition in M&A will continue to be fierce and although we were not able to get FXAll done, there are other targets we can go after.”
However he does not expect large exchange groups to be acquired. “They are increasingly perceived as part of the national domestic DNA,” he added.
Gregor Pottmeyer, chief financial officer at Deutsche Börse, said on the call that the priority for using excess cash will be M&A, and if that is not possible, the group will consider share buybacks.
— Deutsche Börse Group (@DeutscheBoerse) October 28, 2019
Deutsche Börse generated net revenue of €2.2bn ($2.4bn) in the first nine months of 2019, a 7% increase from the same period last year. Pottmeyer said the group is confident of meeting its full-year targets and confirmed guidance of around 10% net profit growth for 2019.
He continued that the main drivers of growth were Eurex, the financial derivatives business, and EEX, the commodities segment.
“In addition to over-the-counter clearing, secular growth of net revenue in the Eurex segment was mainly a result of new products and pricing models, whilst in the EEX segment, the positive development of the secular net revenue growth reflected significant market share gains in Europe and the US,” Pottmeyer added.
Pottmeyer also highlighted 360T, Deutsche Börse’s foreign exchange business, which had its best ever month in September.
The integration of #GTX Electronic Communications Network in our #FX unit #360T created one of the largest and most diverse #OTC FX marketplaces. Find out how GTX compliments 360T´s existing product suite: https://t.co/7LqI2fm9Wq #Roadmap2020 pic.twitter.com/i9DGBbQjcT
— Deutsche Börse Group (@DeutscheBoerse) October 7, 2019
The new structures approved by the SEC could herald a new era of active ETFs.
The fintech allows clients access to analytics and reporting tools for non-listed investments.
SFTR will introduce new reporting obligations from April 2020.
The service will enable the mapping of risk factors to a pool of global derivatives data.
Euronext vet Lee Hodgkinson is the fintech's CEO.