London Stock Exchange Group-Microsoft case study

London Stock Exchange Group’s partnership with Microsoft is a unique tech collaboration, spanning equity investment, complex strategic initiatives, and major infrastructure projects.

London Stock Exchange Group’s (LSEG) 10-year, multi-billion-dollar strategic partnership with Microsoft for next-generation data and analytics and cloud infrastructure solutions represents the next stage in LSEG’s transformation into the leading global financial markets infrastructure and data provider.

Following LSEG’s $27bn acquisition of Refinitiv in 2021, this landmark partnership with Microsoft was the most significant tech transaction of 2022, and the first of its kind – in terms of depth and complexity – between a major tech player and a leading business in the financial sector, spanning equity investment, complex strategic initiatives, and major infrastructure projects.

The multi-faceted nature of the deal presented numerous challenges, including the bringing together of two large and very different organisations, as well as antitrust and regulatory hurdles.

LSEG looked to long-time trusted adviser Freshfields to bring a bench of lawyers able to dive deep into novel arrangements with both client and counterparty.

Bespoke, agile legal service

The work was highly complex, with complicated legal and commercial considerations in a tight timeframe.

The deal was “far, far different to simply lifting and shifting assets to the cloud”, LSEG’s Chief Executive David Schwimmer told the FT, also describing the partnership as a “significant milestone on LSEG’s journey towards becoming the leading global financial markets infrastructure and data business, [one that] will transform the experience for our customers”.

This landmark deal involved three considerable simultaneous transactions: a strategic alliance to develop next-generation productivity, data and analytics and modelling solutions; migration of LSEG’s existing data platform and technology infrastructure to the Microsoft cloud environment; and equity investment by Microsoft in LSEG through a share acquisition worth around $2bn from the Blackstone and Thomson Reuters consortium (existing shareholders in LSEG as a result of the Refinitiv acquisition). In connection with the strategic partnership, Scott Guthrie, Microsoft’s Executive Vice President, Cloud and AI Group, joined the LSEG board as non-executive director.

Freshfields worked with the client team to design a framework for the deal and how to execute it, adapting to the deal’s evolving shape. This highly bespoke service with a sensitive touch across a range of areas drew upon Freshfields’ close understanding of LSEG’s businesses.

The transaction required seamless and collaborative multidisciplinary and multijurisdictional legal advice at pace, handling a huge number of inputs from LSEG and Microsoft. Freshfields was at the heart of the deal, leading on the equity transaction and the ground-breaking strategic alliance. Freshfields’ Global Transactions team advised on corporate aspects (a variation of the lock-up arrangements contained in the existing Blackstone/Thomson Reuters consortium relationship agreement, and entry into new standstill and lock-up arrangements with Microsoft), complex commercial arrangements comprising the strategic partnership (including a sophisticated IP regime and highly bespoke development methodologies), and the collaboration’s overarching framework. Freshfields also provided antitrust and regulatory advice, including helping to navigate the highly regulated financial services environment, tax advice in the UK and US, as well as employment and pensions input.

The Freshfields team involved lawyers from across its global practice, including in London, New York and Washington.

A collaboration of this nature involved many features of a JV arrangement and Freshfields leveraged its extensive experience, including on funding and governance, whilst dealing with the bespoke situation at hand, finding solutions that would work for both parties. Freshfields and LSEG lawyers worked in an agile team to design the legal framework, while the strategic initiatives evolved in parallel. To ‘hit a moving target’ Freshfields presented output in new ways (often graphically and to senior stakeholders in a regular rhythm), persuading all parties to set new market norms.

Another important aspect of Freshfields’ role was bringing together two very different organisations with their own ways of working and helping them find ways to collaborate on projects designed to evolve over several years.

Transformative tech partnerships

The unique LSEG/Microsoft strategic partnership has moved the market on tech collaboration deals. As well as being transformative for LSEG’s core data and analytics businesses and critical tech infrastructure, Freshfields’ work has wide implications for tech-driven collaborations in the financial data space and beyond.

For LSEG, the deal builds on the integration of Refinitiv, and significantly advances its strategy of building an efficient and scalable platform for its data and analytics business to deliver next-generation services for a range of customers across the financial markets value chain through improved workflow and greater flexibility.

Under the arrangements, LSEG’s data platform and other key technology infrastructure will migrate into Microsoft’s Azure cloud environment. Workspace, LSEG’s next-generation data and analytics workflow solution, will become interoperable with certain Microsoft applications, and the companies plan to introduce innovative new cloud-based analytics services. LSEG and Microsoft have also agreed to explore the development of digital market infrastructure based on cloud technology, aiming to transform how market participants interact with capital markets across a broad range of asset classes.

The strategic partnership “is a significant milestone,” CEO of LSEG David Schwimmer said in a release: “Bringing together our leading data sets, analytics, and global customer base with Microsoft’s comprehensive and trusted cloud services and global reach creates attractive revenue growth opportunities for both companies… We believe our partnership with Microsoft will transform the way our customers discover, analyse, and trade securities around the world, and create substantial value over time.”

The deal is also a key strategic step for Microsoft in pursuit of its aim of empowering the future of financial markets and transforming how firms transact across the entire financial markets value chain. Satya Nadella, Microsoft’s Chairman and CEO, said in a release that the partnership will “build next-generation services that will empower our customers to generate business insights, automate complex and time-consuming processes, and ultimately, do more with less”.

The strategic partnership is expected to increase LSEG’s revenue growth meaningfully over time as the key workstreams are delivered and new LSEG products and services come on-stream.

Freshfields’ London Head of Global Transactions and LSEG Relationship Partner Andrew Hutchings comments: “The LSEG transaction demonstrates the skills and flexibility of our team, bringing together multiple disciplines and strands to deliver market-leading deals against great time pressure.”

Head of Freshfields’ Intellectual Property and Technology Group Giles Pratt said: “This deal has become a benchmark for collaborations between big tech and industry, and even set the stage for further innovation between the parties to create bespoke large language models.”

The transaction is anticipated to garner interest among other tech and financial services players, as well as companies in other industries looking at how to fast track their own digital transformation as tech players and traditional businesses further converge.

The Lawyer awarded Freshfields the Corporate Team of the Year 2023 for work on this deal, remarking that it was “clear how well Freshfields knew its client”, with judges also saying “it was a great example of the firm’s cross-functional ability, with the firm’s transactional team seeking counsel from other partners in tax, competition, regulatory and employment”.

Freshfields also took first place in the technology category at the FT Innovative Lawyer Europe Awards 2023 and won Corporate Team of the Year at the 2023 Legal Business Awards for this work. 

You can find more of our transaction insights at transactions.freshfields.com and more of our thoughts on emerging tech issues in our technology quotient blogs.