S&P Global plans to acquire Kensho Technologies for $550 million in a deal that demonstrates the increasing importance of data analytics and machine learning technologies on Wall Street.
The acquisition price includes an unspecified mix of cash and stock, and is net of cash acquired, S&P Global (NYSE: [[ticker:SPGI]]) said in a press release.
Artificial intelligence has begun creeping into virtually every industry, and the financial sector is one of the first places where it seems to be making an impact. It makes sense—there’s a ton of data to crunch, and money to be made if software can help make better decisions more quickly. S&P’s purchase of Kensho is a big endorsement of that vision and the startup’s capabilities. Before this deal, Wall Street firms were investing in A.I. startups, but most of the sector’s notable acquisitions have been made by large tech companies like Google, Apple, Amazon, Facebook, Intel, and Microsoft, according to data from CB Insights.
The Kensho deal is a feather in the cap of the Boston-area A.I. and financial technology sectors. It marks S&P Global’s second acquisition of a local machine learning company in the past month, following the announcement that it plans to purchase Panjiva, which provides data analytics about global supply chains.
Cambridge, MA-based Kensho was founded by CEO Daniel Nadler in 2013 while he was pursuing a PhD at Harvard University. The company developed machine learning software that it has said can comb through huge amounts of data to find correlations between world events and the resulting effects on publicly traded stocks and other financial assets. The company’s first product was an intelligent virtual assistant dubbed Warren, which was designed to enable investors to perform research using natural-language queries. For example, “What happens to the share prices of energy companies when oil trades above $100 a barrel and political unrest has recently occurred in the Middle East?” The idea was to create a Siri for finance professionals.
Kensho has since dropped Warren from its marketing materials, but it still offers data analytics and visualization software powered by A.I. technologies. Its customers include global banks and investment firms, as well as national security agencies, according to a press release. Kensho has offices in Cambridge’s Harvard Square; New York City; McLean, VA, outside of Washington, DC; and near Los Angeles.
Kensho has drawn significant interest from Wall Street banks and financial firms. S&P Global—which provides credit ratings, market intelligence, and other data to the capital and commodity markets—led a $50 million Series B investment in Kensho last year, which reportedly valued the startup at more than $500 million. Other contributors to that investment were Goldman Sachs, JPMorgan Chase, Bank of America Merrill Lynch, Morgan Stanley, Citigroup, and Wells Fargo. Kensho is also backed by Google Ventures and In-Q-Tel, the venture capital arm of the CIA, according to the company’s website.
After last year’s investment, S&P Global’s partnership with Kensho involved the two companies collaborating on developing products. Ultimately, the two sides decided to take their collaboration to the next level.
“In just a short amount of time, Kensho’s intuitive platforms, sophisticated algorithms, and machine learning capabilities have established a wide following throughout Wall Street and the technology world,” said S&P Global CEO Douglas Peterson in a prepared statement. “Via this acquisition, S&P Global is demonstrating a strong commitment to not just participating in the fintech evolution, but leading it.”
S&P Global’s other recent fintech and data technology deals include investments in Algomi and Ursa Space Systems.
After the Kensho deal closes, the company will continue to operate independently in Cambridge and keep its brand, S&P Global said. Nadler will report to S&P Global CFO Ewout Steenbergen. Kensho currently employs more than 120 people and is profitable, according to a Forbes report.
“Combining our unique and industry-leading expertise in machine learning with S&P Global’s deep data sets, global-scale analytics platforms, essential benchmarks, illustrious reputation, and strong leadership team will allow Kensho to expand and innovate faster, further, and in new ways,” Nadler said in a prepared statement.
