S&P Global Inc. is wading further into the waters of artificial intelligence with a $550 million bid to acquire Kensho Technologies Inc.
The financial data and index provider agreed to acquire the AI startup in the fourth-largest financial technology acquisition announced in 2018 so far, according to S&P Global Market Intelligence data.
Kensho, which provides analytics, AI, machine learning and data visualization systems, is expected to help S&P Global undergo a "dramatic evolution" in its businesses, President and CEO Douglas Peterson said during a March 7 conference call. S&P Global previously invested in Kensho in March 2017 during one of the company's rounds of financing.
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"This was not some unheard of startup" for S&P Global, BMO Capital Markets analyst Jeff Silber said in an interview.
The pending deal, expected to close in the first half, could mark the largest acquisition for S&P Global in nearly three years. The $550 million agreed-upon acquisition of Kensho is the largest deal the company has announced since 2015, when the company, then McGraw Hill Financial, acquired news and data solutions provider SNL Financial LC for $2.23 billion.
S&P Global's deal for Kensho marks another step in Wall Street's pursuit of new technology and automation. From robo-advisers to algorithmic trading, financial services companies have sought any advantage on their competitors through technological capabilities.
"AI has evolved from being a very academic and scientific field," Kensho co-founder and CEO Daniel Nadler said during the call. "It has moved toward a type of science and technological application that increasingly starts to mimic what ordinary people do in the course of their day-to-day work."
Kensho's technology is expected to be a large opportunity for S&P Global's index business in particular, according to a March 6 research report from Stifel analyst Shlomo Rosenbaum. The business could aid S&P Global's Market Intelligence unit, where it could add more analytical tools. The company's ratings business could also see its surveillance measures enhanced and its credit tools improved with Kensho's help, Peterson said during the call.
No matter how Kensho fits into the company's framework, the potential acquisition will likely give S&P Global "credibility" in the artificial intelligence and machine learning communities, BMO's Silber said.
"If I'm a small company, Kensho's probably a great test case, and I'm sure a lot of companies want to be aligned with both Kensho and now S&P, now that they entered this space in a big way," he said.

