Exchange M&A is back in vogue. However, targeted, strategic deals rather than building scale are emerging as the dominant strategy, finds William Mitting.
Two years ago, cross-border mega mergers between exchanges
were all the rage. Following the failure of most proposed deals
in the face of competition concerns and thinly veiled
protectionism, cash rich exchanges with an appetite for
acquisitive growth have altered course. In today’s
market, an exchange deal is more likely to be strategic,
targeting a new service or asset class rather than economies of
scale or global reach.
Even the biggest of them all: the
IntercontinentalExchange’s bid for NYSE Euronext,
while on the face of it a cross-border mega merger, has at its
heart a strategic move into interest rate derivatives through
the purchase of NYSE’s Liffe subsidiary (the rest
of its European operations will be sold off –
including perhaps the European equity options arm) and its
successful short-term interest rate franchise.
Over the past 18 months, the London Stock Exchange has
invested in FTSE International and LCH.Clearnet, while NYSE
Euronext, Deutsche Bourse and TMX continue to build out their
technology offerings. Of all the strategies though, Nasdaq
OMX’s is one of the most intriguing.
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