London Stock Exchange Group - [Business Breakdowns, EP. 40]

Dec 22, 2021

Nick Shenton, a fund manager at Artemis with nearly a decade of expertise in LSEG, dives into the intricacies of the London Stock Exchange Group. He highlights its pivotal role in global finance and discusses the company's transformational acquisition of Refinitiv. The conversation touches on the importance of post-trade services for market stability and the impact of technology on its growth model. Shenton shares insights into navigating complexities and valuing businesses within expanding markets, emphasizing innovation and long-term strategies for success.

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INSIGHT

LSEG's Role and Industry Growth

LSEG is a key player in the world's financial markets, facilitating capital and data flow.
The industry is growing due to technology, regulation, and increasing digitization.

INSIGHT

LSEG's Business Model

LSEG's business model boasts high margins, recurring revenue, and strong cash flow.
Its success stems from providing mission-critical, deeply embedded services with sticky customer relationships.

INSIGHT

LSEG's Four Modules

LSEG operates in four modules: capital markets (primary and secondary), data & analytics, and post-trade.
These modules interact as an ecosystem, with capital markets connecting providers and demanders of capital.

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Today, we’ll be breaking down the London Stock Exchange, now referred to as LSEG. LSEG is a nearly £40 billion market cap business that plays an integral role in the infrastructure of the world’s financial markets. Since 2000, there have been at least 11 attempts at mergers and takeovers of the business by other exchanges and banks. The company itself made a notable acquisition when it closed on its M&A of Refinitiv from Blackstone in January of this year. The company offers a wide range of services, financial markets, and data exchanges, which make it an essential player in the world’s markets.

To break down the business, Zack Fuss is joined by Nick Shenton of Artemis, a UK-based fund manager.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Show Notes

[00:02:47] - [First question] - The industry LSEG operates in and its role within it

[00:05:37] - How to think about LSEG as a business and what drives their growth

[00:07:33] - The model that allows for such high profit and how its pieces work together

[00:14:21] - Overview of the data analytics side of their business

[00:18:29] - Trading & banking as a key component of their data analytics revenue

[00:22:09] - Its 300-year history and what has led them to become such a dominant player

[00:29:25] - Thoughts on the Refinitive asset they’ve acquired and its role in future success

[00:33:04] - Key factors that allow LSEG to sell in adjacent markets and their competitive advantage

[00:38:57] - Drivers behind the growth of the digital financial market industry

[00:41:26] - Structural risks that could impede LSEG’s growth over the coming years

[00:45:29] - Simplifying their story to help investors better understand their underlying growth

[00:47:35] - Lessons for builders and investors when studying LSEG’s story