Rimes Wards off Sale Speculation with Investment from EQT

In mid-December, Barron’s reported that Rimes Technologies was up for sale. The data management specialist, which has been growing its sphere of influence in the regtech space, was reported producing “annual earnings before interest, tax, depreciation and amortization (Ebitda) of $20 million to $25 million,” and that it was “expected to sell for a ‘big price,’…which some pegged at around $400 million to $500 million,” according to the article.

In various publications, several of the largest data giants in the capital markets were mentioned as possible suitors, as was the London Stock Exchange Group (LSEG). A source with knowledge of the deal tells WatersTechnology that LSEG, which is also in the processes of closing a deal for Refinitiv, was the leading candidate. But a couple of weeks ago, the rumors started to shift, and outside investment became the most likely near-term path forward for Rimes.

Sure enough, yesterday it was announced that Swedish private equity firm EQT, through its Mid Market Europe fund, was making “a significant growth investment” in the managed-services provider, though the amount has not been disclosed and a spokesperson for Rimes declined to provide a number.

Rimes has only ever taken one investment before, a small stake from Abry Partners in 2017. Otherwise, the company has grown organically, until now.

One source at a market structure firm, who is familiar with the original sale discussions, tells WatersTechnology that several exchanges had made offers to acquire the company in recent months, but that Christian Fauvelais, Rimes’s founder and CEO, was likely more keen to hold off on a sale until there was more clarity in the market (Fauvelais was not available for comment).

“My initial thought is that this is a good way to take a breather,” the source says. “It’s suggestive of Rimes’s desire to carry on for the time being on their own without the need for a mothership or a parent company.”

Virginie O’Shea, an independent capital market technology researcher, says that the deal makes sense, particularly in servicing the needs of Rimes’ client base.

“As a data services provider, it makes sense for Rimes to remain independent for now, as buy-side firms are often hesitant to work with the same firm for data provision and data cleansing and support. Investment from EQT allows Rimes to remain independent,” O’Shea says.

There has been increasing appetite to strengthen, build out or acquire data businesses in the financial technology industry. The clearest example of that trend is the LSEG-Refinitiv deal, which is to be finalized later this year after a failed counter by the Hong Kong Exchange and Clearing Market (HKEx).

The market structure source suggests that, given the high demand for data and data services, Fauvelais is apprehensive of any acquisition, and is likely to hold back on any offers until Rimes can secure a satisfactory deal and perhaps create an environment for a “pseudo-bidding war” in the future. Rimes’ IP is attractive: while the company does not own content, it aggregates data and customizes it for users’ needs, aiming to relieve clients of the burden of data management.  

Beyond RegTech

EQT is not a name often heard in the capital markets space, though it has a substantial number of investments in the technology, media, and telecom (TMT) sector. The private equity firm has 19 active funds, with more than €60 billion ($66 billion) in commitments across more than 240 companies and 110 exits since its inception in 1994. Its most recent numbers have it at €41 billion in assets under management ($45 billion), up from €30 billion ($33 billion) in 2018.

The EQT investment will enable Rimes to follow through with its strategic objective to expand its data management and regtech product offerings—with a focus on new services around Environmental, Social and Governance (ESG) and data for exchange-traded funds (ETFs).

“With the investment from EQT, Rimes is focused on increasing the company’s market share of its existing managed data services and regtech solutions,” says a spokesperson for Rimes. “Furthermore, the investment increases the pace at which Rimes can bring new solutions to the market across both managed data services and regtech. Given the importance of both EFT and ESG data to investment firms, both will be key areas of focus and growth for Rimes.”

The additional funding will also allow Rimes to strengthen existing partnerships, broaden its global market reach, and more effectively cultivate talent.

Over the last three to four years, Rimes has pushed to build out its compliance technologies, such as its market surveillance solutions RegFocus and its cloud-based RegFocus BMR Control, which offers data for the EU’s benchmark regulation. However, the regtech space has become increasingly competitive, whether with the LSEG’s UnaVista service or Bloomberg building out its offering through an acquisition of vendor RegTek.

“The realm of regtech providers is broad and there are quite a few large providers with deep pockets,” O’Shea says. “In order to remain competitive in that space, vendors need a discretionary budget to invest in the next 10 technologies that their clients and the market demands. Artificial intelligence and machine learning don’t come cheap, so this investment will allow [Rimes] to double down on the necessary research and development to keep pace with technology and regulatory change.”

The transaction is expected to close in the first quarter of 2020 and is subject to customary conditions.