Morningstar buys PitchBook amid ‘rapid growth’ in PE

Investment research provider Morningstar is purchasing private market data provider PitchBook, which currently serves about 180 private equity firms, as investors’ interest in private equity and venture capital grows.

Investment research provider Morningstar has agreed to buy PitchBook Data.

The Chicago-based research firm originally purchased a 20 percent stake in PitchBook in September 2009, about a year-and-a-half after the Seattle-based private market data provider launched. At the time, the firm invested $1.2 million in PitchBook during the Series A fundraising. It invested another $10 million during Series B fundraising in January, a statement from Morningstar said.

In this latest transaction, Morningstar will purchase the remaining 80 percent of PitchBook for about $180 million, according to the statement, valuing the private market data provider at $225 million.

A Morningstar spokeswoman told Private Equity International the 80 percent was owned by a combination of PitchBook, its employees, and 17 angel investors.

Morningstar is targeting PitchBook amid “rapidly growing” interest from investors in private markets, according to president Kunal Kapoor. Currently, the bigger provider offers research and data on about 530,000 public market assets, such as stocks, mutual funds, indexes, futures, options, commodities, precious metals, foreign exchange and Treasury markets.

PitchBook provides private equity, venture capital, and M&A data to more than 1,800 clients. It has about 300 employees, most of them concentrated in Seattle, New York and London, according to the Morningstar document detailing the acquisition.

According to the document, 21 percent of PitchBook's clients are venture capital firms, 18 percent investment banks and intermediaries, and 10 percent private equity firms, as of 30 September. This means PitchBook serves about 180 private equity firms with its data.

Morningstar did not have private capital market data prior to the PitchBook acquisition, the buyer's spokeswoman said.

A PitchBook spokeswoman told PEI the data provider had scaled significantly year over year, and has been operating at a larger scale. As a result, the opportunity to maintain its growth with a strong business partner became more appealing, she said.

She added that in the past few years, the company had fielded interest from strategic and financial buyers. She said Morningstar was an attractive buyer because it had been an investor of PitchBook from the beginning and saw eye-to-eye on the importance of data, research, product, and providing world-class customer service.

This transaction follows the announcement that fund of funds manager Hamilton Lane partnered with private market data provider Bison to launch Cobalt, as reported by PEI . Cobalt is divided into two platforms – one for LPs and one for GPs – to provide them with tools for private fund functions such as due diligence, peer benchmarking, and fundraising management.

“Data has always been Morningstar's sweet spot, and we look forward to working with PitchBook to help investors and advisors better understand and navigate this evolving area of the market,” Kapoor said. “Over time, we plan to add some of Morningstar's proprietary research capabilities to this dataset, and we also see meaningful opportunities to expand the business globally.”

PitchBook founder and chief executive John Gabbert said this acquisition will allow PitchBook to enter its next growth phase, which includes developing a new version of its data and software platform, and expanding its business in Europe and Asia.

Morningstar announced last month that Kapoor will become its chief executive , beginning 1 January 2017, replacing company founder Joe Mansueto. Kapoor has been a member of the PitchBook board of directors since 2012. Mansueto will transition into the role of executive chairman on the same date.

The acquisition is expected to close during the fourth quarter of 2016, and PitchBook will retain its brand and identity, as well as its chief executive.

Morningstar manages and advises a total of $185 billion, as of 30 June.