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As information professionals it has become a common occurrence to be greeted on an otherwise routine day with an enthusiastic email from our favourite research service announcing a merger, acquisition or partnership. A wide spectrum of reactions can ensue, from "Great, we've been needing that additional capability", to "What will they charge for this now", or more incredulously, "What are they thinking?" Indeed, it is reasonable to question what is a research provider thinking when they decide to add-on to their arsenal of services. You are right to wonder whether there a grand master plan they are seeking to fulfil or whether they're making these moves to fulfil the current wishes of their client base. As ever, it could all come down to revenue stream growth or a response to a competitor making a similar play. And ultimately, information managers have to wonder if they changing or expanding their focus or customer target and, most importantly, how it will affect their end users. While each research provider's strategy is different, the answers can satisfy all or one of these motivations.

One vendor of note that has been active in the acquisition and partnering arena is Capital IQ, a provider of data and analytics for global financial professionals. Specifically, in September 2010, Capital IQ made a major acquisition of TheMarkets.com, a provider of equity research (see VIP LiveWire Post "Capital IQ is knockin' on Thomson's door", and the VIP Report: Product review of TheMarkets.com). This topped a year of both partnering and proprietary development of services that have been integrated into the current Capital IQ platform, or offered as an add-on service. I had the opportunity to speak with Ted Vivian, Head of Client Development for EMEA out of Capital IQ's London office, where he has been tasked with expanding the provider's international presence, which is a large part of Capital IQ's growth strategy. Vivian's perspective is particularly informative because he just moved over from a Commercial Operations leadership role at Thomson Reuters, so has a good deal of insight into the inner processes of global financial services data providers.

A little background on Capital IQ will help illuminate the provider's growth path. The company started out in 1999 with the goal of being the very best in its niche. That focus was - and continues to be - to meet the data and analytical needs of private equity, M&A and corporate finance professionals. A natural inclusion to that client base as the database grew was buy-side investment managers. Vivian emphasises that Capital IQ "didn't want, and still doesn't want, to be everything to all of financial services, but will grow to meet client need, to generate revenue and to compete". He added that their vision never included "competing with the real-time data providers, nor are we after the mass market".

While much of Capital IQ's expansion strategy is dictated by client demand, other growth initiatives address competition and generation of revenue. At the end of the day, this is still a business that must turn over a profit to survive, like any other. Control of content is another main factor to consider. "If content isn't controlled by Capital IQ, a partnering company can be bought, go under or change focus," Vivian explains. This has been a problem for many research providers, so under this model the respective parties need to have a very tight relationship.

Many of these qualifications need to be met concurrently before a decision to merge is made. TheMarkets.com is a good example of meeting many of the requirements for acquisition. According to Vivian, "TheMarkets.com was part of the plan for a while. There was customer need, it was a natural fit, we had a good established relationship with them already (access to TheMarkets.com had at one point been offered via the Capital IQ platform but remained a separate entity), and now we could compete directly with Investext (Thomson)". Furthermore, Vivian explains that this acquisition satisfied two key points that are always considered at Capital IQ: 1) Does this satisfy customer demand of having content all in one place that can be screened and has quantitative analytical functionality? 2) Will this broaden Capital IQ's footprint? The acquisition satisfies both of these stipulations: TheMarkets.com adds the missing element of investment research reports and offers workflow enhancements such as broker provided financial models that can be integrated and manipulated with a user's own proprietary data. Also, there is now additional reason to compete head to head with some of the Thomson products. According to Vivian, Capital IQ does not compete, and never will, with the entire stable of Thomson products, which numbers over 1000. But, it will compete with Thomson One Banker and Thomson One Analytics.

If it makes business sense, creates revenue and mitigates risk, Capital IQ will forego the M&A route and build proprietary solutions. One example announced in 2010 is intraday financials, a technology developed to access financial statements minutes after release, and reportedly faster than any other financial data provider. This addresses the workflow needs of the customer base, and Capital IQ controls the process and content once it is released. ClariFi, a research and portfolio management platform targeted at the investment manager audience, was originally acquired by Capital IQ's parent, Standard & Poor's, in 2007. Since then, Capital IQ has built proprietary capability into the original platform. The latest version, ClariFi 5.0, released in June 2010, features new screening and quantitative analysis functionality, plus a refreshed interface. "Customers may have the desktop platform and nice content, but what they also want is the ability to analyse ... in this case, Capital IQ developed ClariFi as a standalone product that exports data from our platform into the ClariFi platform ... this product also competes with Thomson Content Analytics," reports Vivian.

New customer growth is another segment addressed through M&A or build-out. New market growth is coming mainly from international efforts, contributing 20% of Capital IQ's growth rate in 2010. "The U.S. is well sold", adds Vivian. "There we are just taking market share from an existing competitor, but there is new growth in international markets." He names Europe as the main market outside the US, with Asia positioned to garner a larger footprint. "Growth in 2009 for some markets was 6%, for Thomson the same market was 1%." Vivian illustrated how Capital IQ approaches a new market using M&A, partnering or proprietary build for establishment and to gain share. He explains "I have a team that researches the market ... looks at market potential, revenue potential, where can we get the data, can we add on to an existing relationship ,(D&B (Dun & Bradstreet) for example), or does a local supplier make sense."

Capital IQ, like many research and data providers, addresses the need for growth by examining many aspects that affect the business. Satisfying client need is always foremost yet must be balanced with staying competitive and bringing in revenue, while attracting a new client base or market that is a natural fit to the provider's focus. This is not always a smooth or easy process for everyone involved, including the current client. But trust that these changes can affect your job and profession positively, and hopefully satisfy the evolving workflow and content needs of your clients or company.

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