The Euromoney (ERM) share price has jumped 25% on takeover interest and the business-to-business (B2B) information services provider has robustly defied the market downturn.
Is there room for another price pop for this B2B market intelligence operator – or should traders sit it out for shorting opportunities?
Persistent suitors
First, the bid: private equity companies Astorg Asset Management and Epiris LLP are offering a 34% premium of £14.61, based on the Euromoney share price at Friday’s market close.
If the deal collapses – the two private equity companies have made repeated all-cash offers before – it’s likely the Euromoney share price would slump.
There’s an 18 July deadline for a formal bid, just three days before a 21 July trading update, or Euromoney turns its back on the offer. But there could be other offers.
Why this bid interest? Data intelligence has high barriers to entry and a reputation for repeat, reliable subscriptions – good for revenues.
People, deals, disputes
A booming wealth management industry is undergoing big change, particularly Stateside, and data is at the heart of it. Euromoney’s operation criss-crosses many segments, from HR to commodities to asset management.
But why this particular private equity interest? Brussels-based Astorg has a number of investments including research player Third Bridge which would see some synergies with Euromoney.
Astorg is also invested in Opus 2, a software services business embedded in the legal disputes market plus there’s Fenergo, snapped up last year, a financial anti-crime and Know-Your-Customer business.
So plenty of opportunity for cross-selling as well as more proprietary product differentiation. Or, more marketing potential.
Euromoney – how it makes it:
- There’s three divisions: commodity-focused Fastmarkets, Financial & Professional Services (FPS) and Asset Management.
- While publishing a monthly magazine, Euromoney’s business relies heavily on subscriptions and events. But like many publishing businesses, Euromoney had a tricky pandemic.
- In May it reported pretax profits of just £7.6m for the six months to March 31 compared to £15.4m a year before.
- But half-year revenues surged 19% to £186.4m while its Financial & Professional Services arm – its biggest, taking around 45% of group revenues – grew 37% to £79.8m.
So a mixed bag – but a current price-to-earnings ratio of 118 is high.
People intel thrust
Euromoney’s business has also been bolstered by three acquisitions – BoardEx, Wealth-X, Wealth Engine – bought for $95m focusing on high net worth, wealth managers and relationship-mapping.
What is your sentiment on ERM?
Vote to see Traders sentiment!
It also recently snapped up Relationship Science for $7.4m, a professional services data provider.
In other words, less reliance on publishing and a fickle, vulnerable, events business, though this is also evolving online, increasingly.
“We expect,” said Euromoney, “the combination of operating leverage on strong revenue growth and cost efficiencies, including the benefits from reducing our office footprint to deliver results for FY 2022 that are ahead of the Board’s previous expectations.”
Private climate
If the Euromoney board approves the deal then it’s another UK listed firm heading for private ownership.
The Euromoney share price was down 0.5% this morning at £13.78. It pays a dividend tomorrow.
Shorting, remember, is high risk. Especially when investors are under pressure for alternative sources of yield. It is also complex.
Building positions in companies you believe in may be a more reliable investing strategy.
