Opening Cross: Are Purchases a Positive Sign? Elementary, My Dear Watson

Unbelievable: I go away for a week and everyone gets merger-mania. S&P Capital IQ buys French low-latency data and infrastructure vendor QuantHouse, while Markit snaps up UK-based securities lending data specialist Data Explorers. Would it be stealing their thunder if I announce my intentions to consolidate a box of Cadbury’s Creme Eggs?

To be fair, both acquirees have reportedly been on the table since late last year, giving plenty of time for all parties to sort out their deals. However, with many acquisitions, the hard part usually comes after the deal is agreed, when companies have to face the process of integrating their operations. For example, NYSE Technologies is changing the structure of its existing organization—assembled over the years from the acquisitions of NYFIX, TransactTools and Wombat Financial Software, along with assets from within NYSE Euronext—to create a better focus on specific client areas. The former structure was fine for creating synergies between products as the company pulled its various assets together, but the new model will help deliver more growth, officials say.

Of course, with any such change, it’s important to be able to keep track of what data products and services are available, which is the subject of a database of data services from French vendor Da-Target, designed to make descriptive and price information about data services and their providers easily accessible. The next step in the vendor’s plan is to build out coverage of data products and providers in Asia—in addition to its current focus on Europe and the US—which officials estimate could double the amount of content it provides.

Also undertaking a refocus of sorts is SIX Telekurs, which is adapting its US business to offer more tailored solutions that draw on combinations of its data products and content assets to meet specific client needs. Not only does this approach help clients reduce the cost of content management by allowing them to offload more basic processing, but it also opens the vendor up to other potential clients among other industries, such as media companies, says Barry Raskin, president of SIX Telekurs USA.

In another initiative to help clients offload processing and simplify complex analysis of large volumes of data, IBM is in discussions with financial firms to identify uses for its Watson supercomputer—which trounced human contestants on Jeopardy!—in the capital markets, such as for data and sentiment analysis or for risk management, by using its natural language processing capabilities to analyze unstructured information, such as news of M&A deals, for example.

Personally, I think last week’s deals are a good sign for the market. Initially, I was perplexed as to what S&P would want with QuantHouse, or where Markit would find synergies with its existing datasets, because these deals don’t match the kind of consolidation plays we’ve seen in recent years while the industry has been under pressure. But while the global economy isn’t entirely out of the woods yet, after further examination, these do seem to be accretive deals, where each vendor can leverage its new acquisition to bring something new to existing content—such as S&P using QuantHouse to capture faster equity data and distribute its existing content, or Markit using Data Explorers’ securities lending data as a factor for analyzing assets it already has—in addition to each taking their respective acquirers into new territories.

So why are these deals encouraging? Because they mark companies striking out into new areas, rather than just being land-grabs or competitive jostling, demonstrating that they have confidence in these business areas going forward, and are willing to spend for future growth. And that’s the key—once people start thinking about growing revenues rather than shrinking costs, we’re already taking the next steps on the road to a full recovery, hopefully leading to more demand for all of the above. I wonder whether Watson would agree?