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S&P Tried to Buy Morningstar
Posted By Barry Ritholtz On July 1, 2009 @ 10:30 am In Bailouts,Legal,M&A | Comments Disabled
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.
NOTE: In 2007, Morningstar Research announced  that it had acquired Standard & Poor’s fund data business.
Article printed from The Big Picture: http://www.ritholtz.com/blog
URL to article: http://www.ritholtz.com/blog/2009/07/sp-tried-to-buy-morningstar/
URLs in this post:
 Bailout Nation: http://bailoutnation.net/
 Morningstar Research announced: http://corporate.morningstar.com/uk/documents/SP/SP_QA.pdf
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