Pricey or Not, MSCI’s Deal for Burgiss Has Merit
A $697 million deal for the remaining chunk of the firm — 12 times revenue and over 70 times adjusted EBITDA — was still worth it, according to Morningstar.
MSCI bought a minority stake of Burgiss Group in 2020. Now, it’s buying the remaining 66 percent of the private markets data company for $697 million in cash — a price Morningstar says was expensive but worth it.
The buyout announced Monday valued Burgiss at $1.05 billion, a company expected to generate $90 million of revenue in 2023 and with an adjusted earnings before interest, taxes, depreciation and amortization margin of roughly 15 percent. That suggests it traded for about 12 times its revenue and over 70 times its adjusted EBITDA, according to Rajiv Bhatia, a Morningstar analyst who covers MSCI.
“Obviously, that’s pretty expensive. Even if you do factor in some growth,” Bhatia said.
But the Burgiss deal was not a financial transaction, it was a bet on the continued growth of private markets and one with merit, Bhatia said.
When asked about the price paid for Burgiss, MSCI chief financial officer Andrew Wiechmann said the deal was a “strategic accelerator that strongly enhances the long-term strategy for establishing MSCI as the leading provider of tools, data, and analytics for building private asset portfolios.”
“With investors increasingly allocating to private assets to achieve uncorrelated and differentiated returns, this combination positions MSCI to provide private asset investors with the next generation of insights into drivers of performance and risk, standard frameworks, tools to size and define these markets, and systematically build portfolios,” Wiechmann added.
MSCI, best known for its indexing, analytics, and environmental, social and governance ratings for public equities, has been expanding its coverage of private markets. (In addition to Burgiss, MSCI also acquired the global real estate data and analytics provider, Real Capital Analytics, in the fall of 2021.) Folding in Burgiss will give MSCI a meaningful boost.
Burgiss offers investors private asset data, analytics, and software, which covers over 13,000 funds around the world that collectively have $15 trillion invested across private equity, private real estate, private debt, infrastructure, and natural resources, in 195 countries. It has more than 1,000 clients, 55 percent of which are either pensions, endowments or investment consultants, according to an MSCI presentation about the deal. The company has more than 650 employees across the globe.
The two companies share many clients but there will still be opportunities to sell their respective products and services to each other, Bhatia said.
There will also be new opportunities for MSCI to develop new products and services for private markets akin to others it has for public ones, Bhatia added. For example, private market ESG ratings, indices of private market performance, and multi-asset indices.
MSCI’s stock ended Monday’s trading session flat at $547, which Bhatia attributed to its well-respected management team that investors trust when it comes to something like a strategic acquisition.