- As CEO of the London Stock Exchange, David Schwimmer has agreed to pay $27 billion for Refinitiv, the financial data company behind Eikon terminals that’s owned by Blackstone and Thomson Reuters.
- The chief executive, who’s been in the job for less than a year, is taking a bold step, betting the deal can survive a shareholder vote and a thicket of regulatory reviews to get approved.
- Schwimmer joined LSE after a 20-year career as a Goldman Sachs investment banker, where he helped advise global exchanges.
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As a Goldman Sachs banker in 2005, David Schwimmer offered some prescient advice: he helped the New York Stock Exchange buy electronic-trading platform Archipelago Holdings, ending NYSE’s 200 years of mutual ownership and moving it beyond the realm of human traders.
Fourteen years later, Schwimmer is still focused on trading’s shift into the digital world, this time as CEO of the London Stock Exchange. The chief executive, who’s been in the job for less than a year, has agreed to pay $27 billion for Refinitiv, the financial data company behind Eikon terminals that’s owned by Blackstone and Thomson Reuters.
Schwimmer is taking a bold step, assuming the $12 billion in debt that the Blackstone-led investors piled on the company and betting he can navigate a shareholder vote and a thicket of regulatory reviews to get it approved. To succeed will mean diversifying the LSE away from its focus on equity trading and establishing it as one of the biggest global purveyors of financial data. To fail will mean following in the footsteps of a predecessor who met an embarrassing end.
Schwimmer has the qualities he will need to get the deal done, equal parts foresight, execution talent, and clarity of thought, according to interviews with four former colleagues or clients, and a review of Schwimmer’s 25-year career.
Read more: Large exchanges had a staggering 60% profit margin. We break down how they made their money.
Schwimmer was a little known Goldman Sachs partner when he joined the LSE in August 2018, a replacement for Xavier Rolet after the CEO failed to convince regulators to approve a bid to buy his continental competitor, Deutsche Borse. During the course of his 20-year banking career, Schwimmer had advised clients including the Intercontinental Exchange, Chicago Board Options Exchange, and KCG Holdings.
“They wanted an expert on board who knew how to push these deals across the finish line,” said Octavio Morenzi, a consultant at Opimas.
Read more: The London Stock Exchange has a graveyard of past merger attempts. Here’s why the $27 billion Refinitiv deal may be a winning bet.
In making a bid for Refinitiv, Schwimmer is looking to diversify the exchange’s revenue away from a reliance on the sale of its own data and the money it makes selling licenses for indexes such as the FTSE and Russell. Refinitiv brings a huge data business, as well as analytics and other tools to help traders make sense of the information.
Schwimmer will have to win over some of the same regulators who nixed his predecessor’s deal. European Commission officials, for example, are likely to question whether the deal gives LSE more market power to raise prices on the financial data it sells to investment banks and investors. The commission is under considerable pressure from investment banks to take a closer look at the cost of financial data, according to Morenzi.
In the US, the issue reached a boiling point earlier this year when Nasdaq, NYSE and Cboe Group all filed lawsuits against the Securities and Exchange Commission over a proposed pilot that would analyze their pricing models for transaction fees and rebates. Since buying Archipelago, the now ICE-owned NYSE has reaped more and more revenue from selling its data.
Truffle risotto and big deals
Schwimmer has by many accounts been training for this his whole career.
Early in his Goldman tenure, which began in 1998, he helped build a business around a small technology platform that looked to disrupt the voice-brokered commodity options market. A client bought the tech and a Goldman team, including Schwimmer, helped put together a consortium behind it.
That client was Jeff Sprecher, and the platform would eventually become the financial behemoth now known as Intercontinental Exchange. Schwimmer counted as one of Sprecher’s consigliere as he continued building ICE through acquisitions, according to a person familiar with the relationship. An ICE spokesman declined to comment.
When the CBOE was thinking about going public, William Brodsky, the CEO and chairman at the time, decided that of all the bankers he could choose, he wanted Schwimmer. He’d heard the banker talk on how to value exchanges not as mutual organizations but public companies and was impressed by his articulate explanation, Brodsky said in an interview. When the IPO took years longer than expected, and the Goldman banker moved into different roles, including one that took him to Moscow, he kept CBOE as a client.
“What was significant was the length of the journey we had and the consistency we got from David,” Brodsky, now the chairman of Cedar Street Asset Management, said in an interview. “I was impressed by his combination of intellect, humility, and good common sense. Not only did we lean on him very strongly but he and I have kept in touch.”
Schwimmer sought out Brodsky when he was considering the LSE role, and the two men had dinner together in London just a couple months ago.
Schwimmer’s old Goldman headshot shows a man with a steely gaze and a straight mouth. He’s an outdoor enthusiast, known for hiking and cycling, and a long-suffering fan of the New York Mets baseball team.
Read more: LSE’s $27 billion bid for Refinitiv highlights how hungry exchanges are for data. Industry insiders say FactSet could be the next target.
Described by former colleagues as collegial but decisive, Schwimmer hasn’t shied from controversy. When he advised John Thain, NYSE’s then CEO and a former Goldman partner, on its purchase of Archipelago, he had to navigate a tricky situation: Goldman owned a 15% stake in the electronic platform and was acting as its adviser.
Emails unearthed by Roddy Boyd at the New York Post in 2005 seemed to suggest that Schwimmer pushed hard in 2005 to bring the two sides together. He arranged for the CFOs of the two firms to meet over truffle risotto at Primavera, an Upper East Side Italian restaurant, according to the New York Times. Both had doubts but agreed to take the idea to their bosses, the newspaper reported.
“We have to help both sides think about pro formas, synergies and ultimately value,” Schwimmer wrote in an email, according to the NY Post.
A week after the CFO dinner, Thain and Archipelago’s chief met at Goldman’s then-headquarters on Broad Street. Talks progressed.
The proposed transaction triggered a court case, brought by traders who held seats on the exchange and thought the NYSE should have gotten a bigger percentage of the combined entity. At it’s heart were questions around Goldman’s role advising both sides of the deal and the valuation. Schwimmer testified in court over Goldman’s role.
When the deal was finally closed and the combined company’s stock debuted on the exchange, Schwimmer was on the NYSE floor for the ringing of the bell.
Read more: The Wall Street battle over skyrocketing market data fees could reach a boiling point in 2019
Blankfein’s guy moves to Moscow
His role in the NYSE deal is just one sign of how well Schwimmer, described by a former colleague as “very strategic,” understands the exchange business. His view on where markets are going came in handy when LSE’s board went looking for a successor to Rolet. Directors reportedly considered as many as a dozen candidates for the job, according to the Telegraph.
Tim O’Neill, co-head of Goldman’s consumer and investment management division, who worked with him closely over the years, said the role and this deal is a natural fit for Schwimmer.
“All the years that I have known David, he has been very interested in the digitization of workflow,” O’Neill said. “He’s always playing it forward, looking for where the model will evolve. And that’s not just execution, it’s data flow too. “
When he got to the LSE, Schwimmer took time to really understand the business inside and out, according to two people familiar with his approach. He held meetings and solicited employee feedback with a low key but direct style, one of the people said. When he’d heard enough, he moved quickly to enact change, making two key personnel decisions just months after arriving, the person said.
And he’s detail oriented. The 2005 emails published by the NY Post show Schwimmer engaged in minutiae that could get the deal done: he suggested connecting the head of human resources for the NYSE with a peer in Goldman’s HR department to talk about employee-stock plans. In putting together the Refinitiv deal, Schwimmer commissioned analysis, ingested the information and moved forward deliberately, one of the people said.
A lawyer by training, he joined Goldman’s investment banking division in 1998. After completing the NYSE deal, he was tapped by Lloyd Blankfein, then the firm’s president, to be his chief of staff. In June 2007, Schwimmer accepted a role co-heading Goldman’s Russia business and moved to Moscow. He’s fluent in Russian and has an international affairs degree from The Fletcher School of Law and Diplomacy in addition to an undergrad degree from Yale University and a law degree from Harvard.
He moved back to New York in 2010 to run metals and mining investment banking in the Americas, according to a bio on the website of the Center for New American Security, the largely Democrat-funded centrist think tank that specializes in US national security issues where he serves on the board. (Schwimmer gave to Hillary Clinton’s 2016 presidential campaign).
In 2011, Schwimmer took over the global metals and mining business, which he would continue until his exit for LSE. Schwimmer made partner in 2012, and added oversight of the market structure investment banking team in 2017, the bio shows. That year, he helped advise KCG Holdings in its $1.4 billion sale to Virtu Financial. The price represented a more than 10% premium.
Talks with Refinitiv initially progressed around the idea of signing partnerships or doing asset swaps, according to Bloomberg. But before long, Schwimmer turned the talk to an all out acquisition. The exchange presented “an informal deal blueprint” in May, the wire service reported. Internally, the exchange used the code words “Project Artist.” Africa was another code word used for the deal, one of the people said.
When Schwimmer took the job, much of the talk among analysts and the media suggested that he might end up selling the exchange to an overseas buyer, with his old client ICE among the likely candidates.
But if he’s successful in navigating what may be an 18-month long regulatory process, Schwimmer will have figured out how to go from a seller to the master of his own destiny.
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