Microsoft acquires 4% stake in the London Stock Exchange

By Molly Gretton

Monday morning saw the announcement of a major partnership between one of the world’s most powerful tech companies, Microsoft and the London Stock Exchange Group (LSEG). The £1.5bn investment will see the US tech giant acquire almost 4% in one of the world’s oldest financial institutions and leading financial markets infrastructure and data provider. It will acquire the stake from a consortium of Blackstone and Thomson Reuters and will enable Microsoft to take a seat on the Board of the LSEG.

The 10-year deal includes a contractual agreement in which the LSEG must spend a minimum of £2.3bn over the next decade on a digital makeover using Microsoft’s internet cloud technology, including its Azure data storage product, its Teams communication tools, and integrating artificial intelligence (AI) into its products. Implying that over the course of the next ten years, Microsoft will get back their initial investment of £1.5bn, plus an extra billion on top.

In the Company’s announcement issued on Monday, Microsoft stated that the deal was “expected to increase the LSEG’s revenue growth meaningfully over time as new products come on-stream”. Whilst it is not confirmed exactly what this means, we can conclude that Microsoft will likely work closely with the major financial institution to leverage the plethora of data they hold in multiple ways in a bid to make its data offering more competitive with rivals such as Bloomberg.

Financial trading platforms have been notoriously out of reach for cloud companies in previous years because of the high-speed requirements. However, the Covid -19 pandemic upended how organisations work and operate, resulting in an increase in demand for the cloud. Large tech companies including Microsoft, Amazon and Google, are now in a race to convert many industries to the cloud including the financial services sector.

This strategic partnership, which builds on Microsoft’s investments in the financial services industry, has the potential to be a very strong case study for implementing cloud technology within the capital markets space. Over the years there have been major advancements in the way our financial markets operate however we can all agree that there are still many old and outdated processes used across the industry. In this particular case, using Microsoft’s cloud infrastructure for some of these ‘older’ applications and systems within the LSEG, could provide a solid example for other financial markets around the world to follow. And make life easier for us in the Capital Markets team and our clients!