Apr 4, 2022 - Economy & Business

Morningstar buying private debt data giant LCD for $650 million

Illustration of a close up of an eye with binary in the iris.

Illustration: Aïda Amer/Axios

Morningstar has agreed to buy Leveraged Commentary & Data from Standard & Poor's and will integrate the private debt data giant into its PitchBook subsidiary.

Why it matters: Private equity relies heavily on investment data, and firms pay big to the small handful of companies that can deliver it consistently and efficiently. Today, that universe is shifting.

  • The deal is valued at up to $650 million, including a $600 million up-front cash payment.

Behind the scenes: S&P agreed to sell several businesses to secure regulatory approval for its $44 billion merger with IHS Markit, which closed in February.

  • Morningstar kicked the tires on one of them, CUSIP, which ultimately sold to FactSet for $1.9 billion.
  • But it viewed LCD as the deeper strategic fit with PitchBook, which is much stronger on equity data than on debt data. Plus, there's the secondary benefit of weakening S&P's Capital IQ product, which PitchBook has always viewed as its top rival.
  • The sale process is said to have been competitive, which explains the multiple on LCD's $56 million in annual revenue.

By the numbers: LCD reports having more than 60 employees, while PitchBook founder and CEO John Gabbert tells Axios that his company has over 2,500 people and "is nearing 8,000 institutional customers."

  • Gabbert also says there's no internal talk of a spinout for PitchBook, which Morningstar bought in 2017 for $225 million. "They've genuinely let us operate independently, which really is unusual."

The bottom line: Founded in 2006, PitchBook was much later to the PE data game than were firms like S&P. With this deal, it's the 800-pound gorilla.

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