We talked to 7 insiders about the $27 billion Refinitiv-LSE deal. Here's how one of the biggest data deals of the year came together.
- The London Stock Exchange has agreed to a $27 billion deal to buy data provider Refinitiv, just a year after the company was spun out of Thomson Reuters by private equity firm Blackstone.
- The deal is being led by some of the biggest names in M&A in London, including Goldman Sachs, Morgan Stanley, and Evercore.
- A media report about the deal talks triggered an scramble to get in front of the news, followed by a final sprint of negotiations and legal work, with lawyers and bankers holed up in a London law office to hammer out specifics.
- Conditions were less than ideal. One person said on at least two nights over a five-day period to get the deal done, a mouse was seen scampering across the law office floor.
- "I am taking August off," said one adviser of the deal's announcement. "I'm exhausted."
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To nail down terms for the London Stock Exchange's expected $27 billion deal to buy Refinitiv, bankers and lawyers descended on the London office of global law firm Freshfields Bruckhaus Deringer - pulling all-nighters that to industry vets are a badge of honor.
And according to one person who was there, there was also an unusual guest: a mouse. On at least two separate nights, one was seen scampering across the floor of the Freshfields office, located just a few blocks from the River Thames, the person said.
"We wondered whether this was a new M&A tactic to get us to not read the documents so closely," the person joked.
It was in this nondescript building that attorneys, bankers and executives - exhausted from sleep-deprived nights - hammered out the final deal terms that resulted in what's likely to be one of the biggest financial technology deals of the year. When it was announced last Thursday morning, both sides shook hands with a photograph taken of dealmakers, but there was no grand celebration. Mostly, they were just happy to finally get some fresh air and reflect on the work they had done.
"I am taking August off," said one adviser of the deal's announcement. "I'm exhausted."
The deal, which had been thrown into the public spotlight earlier than some executives expected, required a deluge of work at the headquarters of Freshfields, LSE's legal advisor: namely, finalizing hundreds of pages of legal documents that covered all aspects of the deal, including its purchase and sale agreement, and working out final deal terms.
The home-stretch sprint came right after a hiccup, when news of deal talks were leaked to The Financial Times on Friday, July 26. This prompted LSE executives to hastily draw up a press release, making sure they were in compliance with UK laws requiring they inform shareholders about significant deals.
"They had to scramble to put out a statement at 1 a.m. London time," said one person close to the deal, who characterized the leak as "not ideal."
Next, Saturday morning called for an all-hands-on-deck at Freshfield's London office, which became ground zero for final negotiations between companies as lawyers and bankers who had once worked on the deal from New York, now descended upon the British law office.
The stakes were clear: If successful, the deal would create a business that challenges financial data behemoth, Bloomberg. If unsuccessful, both sides would walk away with nothing more than what they started talks with. (The deal still requires antitrust approval.)
A union long in the making
That a union between the two companies was even a possibility traces back more than five years, when Refinitiv's CEO David Craig had craved for more investment in his business by its then-owner, Thomson Reuters, according to a person familiar with his thinking.
It was in 2013 that Matteo Canonaco, a co-founder of Canson Capital Partners who socialized with Craig, learned of this and thought Refinitiv would be a good candidate for a leveraged buyout, according to this person. He acted on the information and introduced Craig to Joseph Barratta, global head of private equity at Blackstone, as it was reported by Reuters.
Discussions with Barratta led Blackstone to take a look at Refinitiv, this person said. But the private equity giant couldn't make the math work at the time, according to an account of the deal on a podcast published by Blackstone.
The firm revisited the idea in 2016 and Blackstone's senior managing director, Martin Brand, took over the deal and developed a plan to carve Refinitiv out of Thomson Reuters.
About 15 to 20 meetings developing the thesis behind such a deal proved fruitful, according to the Blackstone podcast. After months of negotiations with Thomson Reuters, the two sides settled on a corporate partnership, where Thomson Reuters would remain a large investor but cede control to Blackstone. Blackstone bought Refinitiv for $20 billion to own 55 percent alongside other investors, while Thomson Reuters owned 45 percent.
The stars align for LSE
After the deal was completed in October 2018, Blackstone immediately began making changes to Refinitiv, working closely with its management.
This included announcing the simultaneous layoff of 2,000 employees, and the hiring of 1,000, to save $650 million. Blackstone also took public an electronic trading platform that Refinitiv owned, called Tradeweb Markets, raising $1.1 billion in April.
The same month, news surfaced that Deutsche Boerse was in talks to buy some of Refinitiv's foreign exchange business- a development that did not go unnoticed by the newly appointed CEO of the London Stock Exchange.
LSE CEO David Schwimmer, who had just joined the British exchange operator from Goldman Sachs, already knew Blackstone from having worked with the firm at Goldman.
In fact, as one of his last acts at Goldman Sachs before joining LSE, Schwimmer had helped sell a company that Blackstone and Goldman jointly owned. The company was Ipreo, another financial data provider, which announced its sale to information analytics company IHS Markit in May.
Brand, Blackstone's lead on Refinitiv, had worked on the Ipreo deal, though he never met Schwimmer in person during the matter, said people familiar with their relationship.
Still, Brand came away with an overall positive impression of Schwimmer. Based on conference calls and other communications, Schwimmer struck Brand as smart, humble and strategic.
Sometime after Schwimmer settled into his new job at LSE in the summer of 2018, Brand and Schwimmer spoke about Refinitiv, though LSE had already taken a look at the company in the past, at least considering a potential partnership, said a person with direct knowledge of the matter. However, the pace of conversations sped up once news of a possible sale to Deutsche Boerse surfaced.
It was believed that the FX side of the business fit better with LSE, so Blackstone slowed negotiations with the German exchange, which in turn gave discussions with LSE a boost in momentum. One adviser described the situation as an "alignment of stars" whereby LSE's share price continued to rise and counterparties began to see the strategic value of a merger.
It took more than three months before news of merger talks leaked to the Financial Times. By that point, the deal was in its final stages, but terms were being worked out all the way through to the day before the transaction was announced, according to people familiar with the matter.
Dealmakers assemble
In the days leading up to the deal's announcement, Freshfields' London office served as a revolving door of Refinitiv and LSE executives, flanked by some of the most influential and expensive dealmakers who joined meetings in and out of the law office.
Within the office, Refinitiv camped out on its sixth floor, while LSE took the fifth. Law firm Simpson Thacher & Bartlett, which represented Refinitiv, and Freshfields, which represented LSE, drafted up paperwork as negotiations neared the finish line.
Bankers were on scene as well, including some of the biggest names in M&A.
Jane Gladstone, a top M&A banker at Evercore, had flown in from New York overnight after news of the deal talks hit the press Friday. She and a team of bankers advising Refinitiv joined attorneys at Simpson Thacher, including partner Elizabeth Cooper, to bring the deal to the finish line.
The exact terms being negotiated in the final stretch could not be determined. One adviser said they focused on governance issues related to board seats and investor rights, although this was disputed by another advisor who refused to provide details about what was actually discussed.
Gladstone is well-known in M&A circles, especially for her financial technology work. Last year, she advised NEX Group on its $5.7 billion sale to CME Group. She was one of eight women out of the 49 people recognized in Institutional Investor's annual ranking of financial technology deal makers.
Also there was Canonaco, the banker who introduced Refinitiv to Blackstone who also had a big reason to see the deal to fruition: He, along with his colleague James Simpson who co-founded boutique Canson Capital Partners, had not just advised Refinitiv, but also raised more than $100 million to invest in the company.
On LSE's side, there was general counsel Catherine Johnson who was on-scene, as well as Paul Carter, group head of corporate development.
Bankers for the exchange who were said to be involved in meetings leading up to the deal's announcement but whose location could not be verified were Mark Sorrell, a UK-based M&A executive at Goldman Sachs, as well as Morgan Stanley's Matthew Jarman, the lead banker who advised Intercontinental Exchange in a bid for the London Stock Exchange in 2016.
Late-night negotiations
As late as Wednesday, there were still meaningful topics being worked out between sides, said two people familiar with the matter, but advisors stayed through the night and produced signatures at 6:55am on Thursday.
The London Stock Exchange had offered $27 billion for Refinitiv in a deal that placed Blackstone and Thomson Reuters as the largest shareholders in LSE, together owning 37 percent of its shares and controlling just under 30 percent of its voting rights.
One person involved said that both sides were "equally unhappy and equally happy" and described the final terms as "hard-negotiated."
On news of the deal's agreement, London Stock Exchange shares rose in a sign that shareholders approved of the transaction.
People with direct knowledge of the deal said Blackstone did not hardball LSE on the offer price so that the public markets would welcome the deal and LSE's share price would tick up.
A big win for Blackstone
The deal was viewed as a big win for Blackstone, which appeared set to double its money just 10 months after it bought Refinitiv. The private equity group, along with the Canada Pension Plan Investment Board and Singapore's GIC, put $4 billion in the form of equity and preferred debt into a 55% stake in Refinitiv last year which now reflects around $8 billion in common equity as of last Friday.
However, Blackstone and minority investors agreed to a lock-up period of two years, after which they will be progressively allowed to sell their stakes over a three-year period.
Because of this, they will have to wait out a return on the investment as Refinitiv is controlled by the London Stock Exchange.
Blackstone will have two board seats while Thomson Reuters will have one. People close to the deal remarked how Blackstone's minority ownership position -- somewhat unusual for a private equity firm -- reflected a vote of confidence in Refinitiv and LSE's prospects.
On a personal level, Brand, the Blackstone lead, had viewed the deal as one of the biggest opportunities in his career. Seen as "straight in style" throughout negotiations, he was thought to have worn the same suit throughout the five-day sprint, all the way until he posed for a picture with an LSE executive last Thursday.
"It was pretty intense," said the person who was there. "[We] were there non-stop."