This month, two different reports in the Italian media (here and here) indicated that Ion Group had acquired Pisa-based trading platform provider List S.p.A from its previous owner, TA Associates. While Ion acquiring a trading technology provider is hardly shocking news, the details around this particular deal are murky.

Beyond those two reports—which do not quote sources from any of the three entities saying that the deal has officially gone through—the only other piece of evidence that exists is a sentence in a financial statement, courtesy of the Italian Business Register. It says that Ion had bought the entirety of List’s shares from List Mid Sarl (its only shareholder), which is controlled by the TA Associates fund, and that in doing so, Ion “extinguished” 100% of List Spa’s debt, which now sits within Ion’s books. It also states that the acquisition happened last March.

And therein lies the mystery: Is it possible that Ion became the primary owner of List a full year ago without anyone outside of List, Ion, and TA knowing?

Rumors of the Ion-List pairing first surfaced at the start of this past February, when WatersTechnology broke the news that Ion had acquired Dash Financial. Six different industry executives had said they heard rumors of a deal, but they weren’t sure if it had been finalized. Another source with knowledge of the talks between the three companies said that the deal is “signed, sealed, and delivered,” but they could not provide any additional detail or documentation. Furthermore, an employee at List said that that they were “shocked” when they read the reports in the Italian press of a merger and that “nothing has been communicated” downstream to the rest of the staff at List. 

Finally, on TA Associate’s website, List is listed as a “past” investment.

List, Ion, and TA Associates did not return repeated requests for additional information. 

Reunited?

A merger between Ion and List would actually make a lot of sense. First, the two have a long history together (see “Deep Italian Roots” below). Second, List has struggled to gain acceptance outside of Italy, while Ion has not been as successful selling in Italy, says Frederic Ponzo, managing partner at consultancy GreySpark Partners.

List has failed to gain any major foothold in the UK—they have some nice pockets of business in places like Canada and Israel, but by and large they are still mainly domestic. They are by far the dominant player in Italy.

Frederic Ponzo, GreySpark

“List has failed to gain any major foothold in the UK—they have some nice pockets of business in places like Canada and Israel, but by and large they are still mainly domestic,” he says. “They are by far the dominant player in Italy, which is also by far the biggest bond market in Europe.”

And for Ion, List would help to “entrench Ion’s dominance on fixed income trading,” as the Pisa vendor is mainly used for fixed income trading, though they do also have equities clients. “[This deal would] give Ion the Italian market,” Ponzo says. “Ion know that with Fidessa and Marketview, they own the rest of Europe, and they will consolidate their dominant position.”

A second consultant says that as fixed income becomes more and more electronic, what’s interesting with List is they have specific connectivity and trading solutions that help with the industry’s push toward automation.

“List certainly seems to cross many of the things that Ion already has, but that doesn’t mean that they have all of these pieces, and it’s not easy to put a lot of these specific pieces together and build off of them—the connectivity, the clients, the flows, the geography,” noting that in 2019, List bolstered its tech stack with the acquisition of IT Software, as well as its subsidiaries The Technancial Company and Exocet. “I’m sure that there are clients who think it’s better to manage one vendor than multiple vendors.”

Contractual concerns

If a deal between the two companies has indeed gone ahead, though, it could mean that List customers will have to adhere to new contractual demands set by the Dublin-based company.

Ion is known to try and lock users into longer-term contracts than most of their competitors. A September 2020 credit opinion analysis published by Moody’s Investors Service, noted that Ion Trading Technologies, the trading tech arm of Ion Group, likes to sign users to long-term, five-year contracts that are “non-cancellable, are auto-renewed on the same terms and adjusted for inflation, which provided good protection to the total contract value over time.”

To look at another recent Ion acquisition, after the company acquired Fidessa, the latter changed its contractual practices, according to multiple sources. For example, Fidessa’s standard contract ran for 24 months, with 12-month rolling periods, meaning a client could cancel at any time within 90 days of the two-year mark, but past that, the contract automatically rolled over for another year, and so on, noted employees who were still at the company.

“If I’m Andrea Pignataro, I’d be getting all of List’s customers to sign new five-year deals. I’d be holding a gun to their head and saying that they’ll lose their access to the technology if they don’t sign this new five-year contract with them.

CEO at competing vendor

Per Ion’s restyling, by the end of 2019, contracts were changed and offered on fixed three-, five- and seven-year terms, with discounts offered for signing for longer timeframes. Additionally, if a client signed a three-year deal, they were tied in for three years, but if no cancelation was made within 90 days of the three-year mark, the contract automatically renewed for three additional years.

Another key change was that payment needed to be made annually in advance, as opposed to a quarterly model that was used prior to the acquisition. In addition, Fidessa’s liability was subject to a cap, and any invoices issued in accordance with the contract must be paid without any “fees despite” mechanism—a term Ion uses—meaning “if you sign for seven years and the service goes down the toilet over time, then you can’t withhold payment as a means of protest or recompense,” said an ex-Fidessa employee in 2019 who worked in sales.

Ion did not respond to a request for comment to see if this is still how Fidessa negotiates its contracts.

Looking at a possible Ion-List pairing, the founder of a trading platform provider that competes with both companies tells WatersTechnology that they expect Ion to rework contracts with List’s clients soon, if that hasn’t already started to happen.

“If I’m [Ion CEO] Andrea Pignataro, I’d be getting all of List’s customers to sign new five-year deals. I’d be holding a gun to their head and saying that they’ll lose their access to the technology if they don’t sign this new five-year contract with them,” they say. “They would then have new long-term agreements with the clients; they know what their revenue stream looks like and can model cashflow around that; and they can start to work out how they can consolidate and minimize cost. But the first task is to ensure you have a source of revenue to pay off the cost of the acquisition, and then figure out how to cut costs and make it pay off sooner.” 

An executive at a fixed income data provider echoes the founder’s point, adding that after Ion’s acquisitions over the last five years, they are hearing that fixed income participants are “frustrated” as to the way that Ion structures contracts.

“In order for you to make that transition [to a new platform] you have to rip out the piping and plumbing you have across all of your businesses, and that is not a small effort—it’s not like switching cellphone providers; it’s a minimum 18-month project. So for you to do that, you have to be really motivated.”

With additional reporting by Rebecca Natale and Anthony Malakian