Morningstar buying private debt data giant LCD for $650 million

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.