Financial market data company Interactive Data Corp. (IDC) has announced its intention of buying an electronic trading network and services provider company, 7ticks LLC, which is expected to help IDC speed up the delivery of its trading data to institutional customers. The company declared that, it will be using the 7ticks network infrastructure technology to further reduce delays, or latency, within its data storage platform.
 
Interactive Data has decided to retain the 42 employees of 7tick. This new company will form a group of IDC’s new real-time market data and trading services group. The company is in an expansion mode and has plans of further increasing its penetration in Asia and Europe within a year. IDC has agreed to pay up to $51.2 million for 7ticks LLC and the transaction is expected to close in early 2010. The agreement includes a tiered earn-out clause that represents $21.2 million of the deal’s potential value. Interactive Data will pay $30.0 million in cash upon the deal’s closing.
 
Historically, the company has grown through acquisitions, which have enabled it to expand into many new markets and build its portfolio of products. The 2006 acquisition of Quote.com and other related assets from Lycos added two popular financial websites – Quote.com and RagingBull.com to the company’s kitty. This enabled IDC to build a new revenue stream from advertising.
 
These websites now offer NYSE Euronext and NASDAQ-listed stocks’ real-time last sale data and quote market data from BATS Trading (BATS), the third-largest U.S. equity market. Other acquisitions include domestic data providers such as Exotech as well as international providers, largely in Europe.
 
IDC also entered into a partnership with Salesforce.com (CRM), whereby a broad range of financial information and sophisticated tools were available on SalesForce.com’s AppExchange. Acquisitions represented 1.0% of the total 2008 revenue growth, and further gains may be expected as the company continues with its acquisition strategy.
 
However, acquisitions have been contributing below expectations due to an underestimation of inter-company revenues. This apart, integrating a newly acquired business may require a disproportionate amount of management’s attention and financial and other resources and detract from the resources remaining for the company’s existing business. It remains to be seen how efficiently IDC integrates the new company into its fold and how 7tick influences IDC’s revenue stream in the coming year.
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