Financial data provider FactSet has attracted takeover interest from major private equity firms after a steep drop in its share price triggered by fears of artificial intelligence disrupting the information services industry.
In recent months, private equity groups Thoma Bravo and Hellman & Friedman have been analyzing the possibility of acquiring FactSet, according to three people familiar with the matter cited by Reuters. The discussions remain exploratory, but the firm’s falling valuation has placed it on the radar of investors searching for discounted technology and data assets.
FactSet’s stock has declined about 39 percent over the past six months as concerns grow that advances in artificial intelligence could undermine the traditional business model of data and research providers. Companies in the sector sell financial data, analytics, and advisory insights to institutional investors and corporations, services that some investors fear could eventually be replicated by advanced AI tools.
The slump has not been limited to FactSet. Shares of competitors such as Morningstar and research and advisory firm Gartner have also dropped sharply since early September, falling roughly 27.6 percent and 29.5 percent respectively. The declines have sparked broader investor speculation about potential buyouts across the industry, according to bankers and investors who spoke to Reuters.
However, the same uncertainty that is pushing valuations lower is also making private equity firms cautious about moving forward with deals. Investors are struggling to determine how artificial intelligence will reshape the economics of the information services sector, making it difficult to establish reliable long-term valuations.
The sell-off intensified after AI company Anthropic released an upgraded version of its Claude Cowork AI tool last month. The launch fueled market anxiety that generative AI platforms could replicate many of the analytical and research functions performed by data providers. The decline has been broad-based, affecting technology giants such as Microsoft as well as accounting firms, law firms, and specialized information providers.
Bankers say the biggest challenge for potential acquirers is determining whether these companies will evolve alongside AI or be overtaken by it. Without clarity about how business models may change in the coming years, investors are hesitant to commit to large leveraged buyouts.
Companies like FactSet historically commanded premium valuations because of their subscription-based revenue streams and high profit margins. Institutional clients pay recurring fees for access to proprietary data and analytics platforms, creating predictable and stable income. But the rise of AI-driven tools has led investors to question whether such services will retain their pricing power.
FactSet’s enterprise-value-to-EBITDA ratio, a key measure used to evaluate company valuations, has fallen sharply. According to data compiled by LSEG, the ratio now sits near 12, down from around 21 last August and roughly 30 in 2022. Similar compression has affected Morningstar and Gartner, which now trade at ratios of approximately 12.6 and 14.8 respectively, significantly lower than levels recorded a year earlier.
Despite the market concerns, FactSet’s underlying business has continued to grow modestly. In the most recent quarter ending November 30, the company reported revenue growth of 6.9 percent year over year, while its annual subscription value — a measure of expected subscription revenue over the next year — rose 5.9 percent.
Investors note, however, that much of that growth appears to be driven by price increases for existing customers rather than a surge in new clients. While this provides reliable cash flow, it offers limited expansion potential, making the company less attractive for traditional leveraged buyout strategies focused on strong growth.
Still, some private equity firms see opportunity in stable cash-generating businesses. FactSet is currently valued at just over $8.4 billion, down dramatically from about $17.5 billion a year ago. For long-term investors willing to bet that the company can adapt to the AI era, the lower valuation may present an entry point.
Industry observers say the market is still trying to understand how artificial intelligence will reshape the software and data sectors. Jordan Jacobs, co-founder of venture capital firm Radical Ventures, told Reuters that the speed of AI innovation makes it extremely difficult for investors to predict how industries will evolve over the next several years.
FactSet itself has begun exploring ways to integrate AI into its offerings. Its shares rose about 6 percent in late February after Anthropic announced a partnership with the company to develop new technology tools, reinforcing the idea that AI developers may collaborate with established data providers rather than replace them.
Experts say the industry may ultimately split into two groups: companies with deeply embedded platforms that remain essential to business operations, and those offering narrower services that could be replaced by automated AI systems. Firms able to demonstrate durable revenue and strategic relevance may use AI as a catalyst for growth rather than a threat to their survival.
