No more acquisitions: deals are off the table for now, says Mr Buhl

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It was a conversation in the men's room of the Connaught hotel in London that changed the growth strategy of the Vienna Stock Exchange. By chance, Michael Buhl, the bourse’s longstanding chief executive, found himself listening to a financial data vendor who, while washing his hands, voiced his gripes about emerging Europe’s stock exchanges.

“It would be great if we could get the same data but from different countries,” he said. “Because everywhere I have a different contract, a different data format, a different interface, a different everything.”

It was a brainwave moment for Mr Buhl and what emerged with him from the Connaught’s lavatory was a policy aimed at buying every stock exchange in central and eastern Europe to stamp Vienna’s supremacy on the region.

But after a merger bid with its regional rival in Warsaw broke down last summer and the exchange made a belated realisation that its acquisition spree may have been misguided, the chief of Vienna-led CEE Stock Exchange Group realised there was another way to achieve the dream.

He did not need to own every bourse in the region to ensure Vienna pulled the strings. He just needed to own, control and sell the data spewing out of them. “Our aim for the future is not to take future stakes . . . but rather co-operate as an IT and data service provider,” says Mr Buhl. “We are trying to reap the synergies that we have now . . . It is all about diversifying away from our traditional revenue streams.”

Last year about 50 per cent of the group’s revenue came from trading fees. The plan is for that to reduce to nearly 40 per cent over the next few years, despite rising trading volumes, as data vending and IT grow as a proportion of the total business.

“The [markets],” says Mr Buhl, “send the data to Vienna. And then from Vienna the data all goes out, and we have a fee split on the income.

“They send us the data, we then have the index, and we have index income that we share. It is a nice business for both sides.”

The Viennese bourse, historically the largest in the region by both market capitalisation and trading volume, spent the years before 2010 snapping up other exchanges in neighbouring former eastern bloc countries, as Warsaw, the only rival with a chance of matching its scale, grew organically.

That race for growth reached a head in March 2013 when the two bourses began negotiations on a possible merger, blending Warsaw’s size and ability to tap the large Polish domestic market with Vienna’s attraction and experience with international investors.

When the deal was pronounced dead in autumn 2014, many assumed Vienna had missed out. But Mr Buhl reckons he dodged a bullet: “We could have made a big, big line and create a cross-membership between Vienna and Warsaw,” he says. “But there was no trust.”

While his exchange had the green light from the board, he says, forthcoming elections in Poland complicated matters and “there was no political will to do something together.”

Since the deal broke down, Vienna’s trading growth has jumped by more than 25 per cent, while Warsaw’s has been flat. “This is now one of the more troubled markets in Europe,” says Mr Buhl. “The development of the market has come to a standstill . . . I don’t see the way forward.”

He adds that the Warsaw exchange now seems to be suffering a bit of despair. “People used to say we are threatened, but actually I think it’s the other way around,” he says.

Mr Buhl, who accepts that there is space in the region for two major exchanges, dismisses any potential rekindling of talks with the Polish bourse for at least five years.

“The door was always open. Now it is not firmly shut, but pretty shut. We are not interested at this stage,” he explains.

Since the failed merger, the Vienna bourse has redoubled efforts to focus on non-traditional revenue growth. That includes a sale of its stake in the Ljubljana stock exchange in Slovenia by the end of this year, where it owns the primary market but not the derivatives exchanges.

“We learnt a lesson [in Ljubljana] . . . if you don’t get the whole infrastructure in the country, it does not make sense,” he explains.

But even with this disposal, Vienna will continue to provide data and investor access to the market. Ljubljana is one of 13 different CEE bourses that can be accessed through a single platform, plugging in to data cables that run directly from Vienna to London or Frankfurt.

Mr Buhl, who has been chief executive of the bourse for more than a decade, also says any future acquisitions are very unlikely.

“Nothing else makes sense. If you take CEE . . . and the market cap of all the listed companies, then 80 per cent are in Warsaw and our group,” he says. “And if you look at trading volumes, it is 98 per cent. Just two per cent is traded in Serbia, Bulgaria, Romania. It’s just not worth it.”

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