S&P Global Acquires 451 Research For Emerging Tech Research – Seeking Alpha

Quick Take

S&P Global (SPGI) has announced the acquisition of 451 Research for an undisclosed amount.

451 Research has developed a research and advisory practice as part of its former parent, The 451 Group.

SPGI is acquiring 451 Research to bolster its emerging technologies research capabilities for its enterprise customer base.

However, SPGI’s stock price appears richly valued, so my current bias is NEUTRAL.

Target Company

San Francisco-based 451 Research was founded to provide actionable insights into emerging technology companies, management, and technologies across numerous industry verticals.

Management is headed by parent group CEO Martin McCarthy, who has been with the firm since 2001 and was previously head of IDD Enterprises.

Below is an overview video of Technology M&A activity:

Source: 451 Research

451 Research’s primary offerings include:

  • Strategic Advisory

  • Go 2 Market Services

  • Market Insights

  • Voice of the Enterprise

  • Cloud Price Index

  • Market Monitors

  • KnowledgeBases

Market & Competition

According to a 2019 market research report by IBISWorld, the market for market research is expected to reach $22.8 billion in 2019.

The market grew at an annualized rate of 2.1% from 2014 to 2019.2019 produced a 2.7% growth rate over the prior year, so it is reasonable to assume a 2% growth handle in the coming years.

The main drivers for this expected growth increasing corporate profits driving investment in more advisory services.

Major vendors that provide competitive services include:

  • Gartner
  • Forrester
  • Frost & Sullivan
  • Numerous other specialist firms

Source: Sentieo

Acquisition Terms & Financials

S&P Global didn’t disclose the acquisition price and terms and didn’t file a form 8-K, so the deal was likely for a financially non-material amount.

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Management also did not provide a change in financial guidance as a result of the transaction.

A review of the firm’s most recent published financial results indicate that as of September 30, 2019, S&P Global had $2 billion in cash and equivalents and $7.8 billion in total liabilities, of which $3 billion was long-term debt.

Free cash flow for the nine months ended September 30, 2019 was $1.8 billion.

In the past 12 months, S&P Global’s stock price has risen 59.4% vs. the U.S. Capital Markets industry’s rise of 22.3% and the overall U.S. Market’s growth of 19.4%, as the SPGI chart and corporate events graphic indicates below:

Source: Simply Wall Street

Earnings surprises versus analyst consensus estimates have been positive in eleven of the last twelve quarters, as the chart shows below:

Source: Seeking Alpha

Analyst sentiment in recent earnings calls has improved markedly since 2018, as the linguistic analysis shows here:

Source: Sentieo

Valuation Metrics

Below is a table of relevant capitalization and valuation figures for the company:



Market Capitalization


Enterprise Value


Price / Sales


Enterprise Value / Sales


Enterprise Value / EBITDA


Earnings Per Share


Total Debt To Equity


Free Cash Flow [TTM]


Revenue Growth Rate


Source: Company Financials

Below is an estimated DCF (Discounted Cash Flow) analysis of the firm’s projected growth and earnings:

Assuming the above generous DCF parameters, the firm’s shares would be valued at approximately $124.27 versus the current price of $271.11, indicating they are potentially currently overvalued, with the given assumptions of the DCF.

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SPGI acquired 451 Research to beef up its technology and emerging company research offerings, with special focus on enterprise IT markets.

As S&P Global Market Intelligence President Martina Cheung stated in the deal announcement,

As emerging technologies continue to remodel today’s business landscape and impact our decision-making, it’s important that we invest in and deepen our expertise in these growing sectors. 451 Research’s comprehensive expertise in critical disruptive technologies will enable S&P Global Market Intelligence to further expand our sector relevant and differentiated data offerings while strengthening our ability to help our customers understand the digital transformation that’s impacting the market today.

While we don’t know how much SPGI paid for the deal, it makes strategic sense to expand its research scope since its enterprise clients are increasingly impacted by technology developments.

However, a generous DCF analysis of SPGI’s stock indicates it is overvalued at its present level.

A comparable basket of publicly held firms in NYU Stern School’s January 2019 dataset for Information Services firms shows an EV / Sales multiple of 6.36x compared to SPGI’s current multiple of 10.85x, also indicating the stock is richly valued at its current level.

Given the pricey valuation for SPGI, my bias is NEUTRAL at its present level.

I research IPOs and technology M&A deals.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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