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Euromoney share price boosted by private equity bid - but is a short pounce smarter?

11:22, 23 June 2022

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Buyout interest rises for Euromoney
Could FTSE-250 listed Euromoney be heading for private hands? – Photo: Getty

The Euromoney (ERM) share price has jumped 25% on takeover interest and the business-to-business (B2B) information services provider has robustly defied the market downturn. 

Is there room for another price pop for this B2B market intelligence operator – or should traders sit it out for shorting opportunities? 

Euromoney share price chart

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Persistent suitors

First, the bid: private equity companies Astorg Asset Management and Epiris LLP are offering a 34% premium of £14.61, based on the Euromoney share price at Friday's market close. 

If the deal collapses – the two private equity companies have made repeated all-cash offers before – it’s likely the Euromoney share price would slump. 

There’s an 18 July deadline for a formal bid, just three days before a 21 July trading update, or Euromoney turns its back on the offer. But there could be other offers.

Why this bid interest? Data intelligence has high barriers to entry and a reputation for repeat, reliable subscriptions – good for revenues. 

People, deals, disputes

A booming wealth management industry is undergoing big change, particularly Stateside, and data is at the heart of it. Euromoney’s operation criss-crosses many segments, from HR to commodities to asset management.

But why this particular private equity interest? Brussels-based Astorg has a number of investments including research player Third Bridge which would see some synergies with Euromoney.

Astorg is also invested in Opus 2, a software services business embedded in the legal disputes market plus there’s Fenergo, snapped up last year, a financial anti-crime and Know-Your-Customer business.

So plenty of opportunity for cross-selling as well as more proprietary product differentiation. Or, more marketing potential.

Euromoney – how it makes it:

  • There’s three divisions: commodity-focused Fastmarkets, Financial & Professional Services (FPS) and Asset Management.
  • While publishing a monthly magazine, Euromoney’s business relies heavily on subscriptions and events. But like many publishing businesses, Euromoney had a tricky pandemic.
  • In May it reported pretax profits of just £7.6m for the six months to March 31 compared to £15.4m a year before.
  • But half-year revenues surged 19% to £186.4m while its Financial & Professional Services arm – its biggest, taking around 45% of group revenues – grew 37% to £79.8m.

So a mixed bag – but a current price-to-earnings ratio of 118 is high. 

People intel thrust

Euromoney’s business has also been bolstered by three acquisitions – BoardEx, Wealth-X, Wealth Engine – bought for $95m focusing on high net worth, wealth managers and relationship-mapping.

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It also recently snapped up Relationship Science for $7.4m, a professional services data provider. 

In other words, less reliance on publishing and a fickle, vulnerable, events business, though this is also evolving online, increasingly. 

“We expect,” said Euromoney at its 19 May half year update, “the combination of operating leverage on strong revenue growth and cost efficiencies, including the benefits from reducing our office footprint to deliver results for FY 2022 that are ahead of the Board’s previous expectations.”

Private climate

If the Euromoney board approves the deal then it’s another UK listed firm heading for private ownership. 

The Euromoney share price was down 0.5% this morning at £13.78. It pays a dividend tomorrow. 

Shorting, remember, is high risk. Especially when investors are under pressure for alternative sources of yield. It is also complex. 

Building positions in companies you believe in may be a more reliable investing strategy. 

Further reading

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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