Cerved/financial data M&A: joining the Ionisphere

Italy’s Cerved has all the right qualities for Andrea Pignataro’s Ion. The acquisitive financial data and software group obeys the dictum that aggregating information increases its value. Cerved, a specialist in debt collection and credit ratings, should help Pignataro increase Ion’s own multiplier effect. On Tuesday, Irish-registered Ion made a full offer at €9.5 per share valuing Cerved at €2.4bn ($2.9bn) including debts. 

Pignataro, a former Salomon Brothers bond trader, has been steadily accumulating businesses he can slot together lucratively as trading and asset management automates. His targets tend to own financial plumbing neglected or unloved by public investors. Low growth and stagnant share prices are his buy signals. He then pursues aggressive private equity-style cost-cutting. But much of that potential value is already priced into the Cerved bid.

Cerved’s credit management division is the third-largest collector of non-performing debt in Italy. Activity should pick up as bad debt from the pandemic builds up this year. The risk management division provides credit metrics to about two-fifths of the market. Demand has already risen as banks issue government-backed support loans. Complementary overlaps with Italian banking software provider Cedacri, which Ion won in an auction this year, should be substantial.

That backdrop might suggest Ion’s offer is opportunistic, even at a premium of around one-third to Cerved’s undisturbed share price. At 11 times this year’s expected ebitda, the valuation is the highest since early 2018, when shares approached €12 each. However, the cost cuts implied by the premium of about €50m annually already appear close to the top of the possible range. 

Following Ion’s acquisition of UK financial software group Fidessa in 2018, headcount was reduced by as much as one-fifth to generate $50m of annual savings or about 15 per cent of overheads.

Implied cuts at Cerved are already a couple of percentage points higher as a share of overheads. Only a bidder with an even more ruthless reputation for efficiencies than Pignataro should consider a counter offer.

The Lex team is interested in hearing more from readers. Please tell us what you think of consolidation in the financial data sector in the comments section below.