PitchBook is set to expand its footprint in the growing private debt data and information market after parent company Morningstar agreed to acquire S&P Global’s Leveraged Commentary & Data unit.
The cash deal is valued at $650 million, including a $50 million payout six months after closing if certain sales targets are met.
Morningstar said the combination of LCD’s private credit offerings and PitchBook’s leading data and research will allow it to offer customers a one-stop shop for private finance news and research.
Seattle-based PitchBook, led by founder John Gabbert, specializes in providing research insights and proprietary data on the private equity and venture capital markets, with coverage spanning IPOs, fundraising and mergers and acquisitions.
Acquisition of LCD aims to complement PitchBook’s database with access to LCD’s platform, which offers market intelligence, analysis and data on the US and European bond loan markets leverage and high yield bonds. The company posted revenue of $56 million last year.
LCD’s credit market coverage also includes assets such as investment grade bonds, distressed debt, bankruptcies and secured loan obligations, or CLOs.
Gabbert said the acquisition would be a natural extension for PitchBook, which aims to provide its clients with coverage of the entire private equity deployment spectrum.
The leveraged finance market has helped fuel the boom in leveraged buyouts since it emerged in the 1980s. Private equity buyouts often rely on financing in part through debt instruments such as leveraged loans, high yield bonds and vendor notes. Leveraged financial issuance in the United States reached $1.08 trillion in 2021, crossing the $1 trillion threshold for the first time, according to a report by S&P. The bulk of new issuance in the market last year, $615 billion, was in loans, while issuance of high-yield bonds reached $464.5 billion, according to the report.
LCD’s S&P/LSTA Leveraged Loan Index, which Morningstar considers an industry flagship, is also included in the deal.
LCD, which spun off from S&P Global following the company’s purchase of IHS Markit last year, also offers more than 500 leveraged loan indices in the United States and Europe. These will be part of the Morningstar indices, a fast-growing segment of the company.
LCD’s existing New York-based management team and other employees, totaling approximately 60 people, will join PitchBook upon closing of the deal, expected in the third quarter.
Chicago-based Morningstar said it plans to fund the transaction with a combination of cash and a new credit facility. The deal is expected to increase adjusted net earnings per share, excluding mergers and acquisitions-related amortization and integration cost, in the first year after closing.
He also said he expects a tax benefit from an increased tax base and future deductions as part of the transaction.