S&P Tried to Buy Morningstar

A Bailout Nation reader reached out to me with the following tale. What makes it so compelling even today was what they thought they could do with it: Turn it into another Pay-for-Play business:

I was at Morningstar as a mutual fund analyst when S&P tried to buy the company circa 1997.

The S&P people insisted to Joe Mansueto (Founder/Chairman) that he was leaving big mounds of money on the table by not charging mutual funds for their ‘star’ ratings.

Joe replied to the S&P bidders that it was an obvious conflict of interest to charge the funds for their own ratings — how would Morningstar maintain its independence?

They called him naive — and stopped the merger talks.

I was a mid-level manager at Morningstar at the time; I heard the above from an exec who was told it by the CEO. I wasn’t in the meetings or anything, but I have no reason to doubt that that’s what went down . . .

I have no first hand knowledge of this, but knowing what I do of the parties involved, and having confidence in this source of info, the anecdote rings rather true to me.

Consider how typical that “Pay for Play” as a model was amongst the Ratings Agencies. To me, it is very consistent with the thought process and attitudes that were pervasive among the rating agencies circa 1990s/early 2000s.

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NOTE: In 2007, Morningstar Research announced that it had acquired Standard & Poor’s fund data business.

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