Private equity firms are exploring potential acquisitions of financial data companies after a sharp decline in valuations linked to artificial intelligence disruption fears, according to a Reuters report.

Buyout groups including Thoma Bravo and Hellman & Friedman have analysed a potential acquisition of FactSet following a 39% drop in the company’s share price over the past six months.

The sell-off has also affected other data and research providers, including Morningstar and Gartner, prompting discussions among bankers and investors about possible takeover opportunities.

Much of the recent pressure stems from investor concerns that advances in artificial intelligence could challenge the business models of companies that sell financial information and analytical tools. The fears intensified after new AI tools were released earlier this year, accelerating the market re-rating of data and software businesses.

FactSet’s enterprise value to EBITDA ratio has fallen to roughly 12, compared with about 21 in August and around 30 in 2022. Morningstar and Gartner have experienced similar valuation compression as investors reassess long-term growth prospects.

For private equity investors, the pullback is creating a potential entry point into established subscription-based businesses with resilient cash flow profiles. Such companies have historically been attractive leveraged buyout candidates due to their predictable revenue and strong margins.

While uncertainty around artificial intelligence remains a key consideration in deal underwriting, market participants say the sector’s valuation reset could open the door for opportunistic acquisitions of high-quality data platforms.

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