Analysis-AI fears temper interest as private equity firms weigh data company deals

Core Insights - Financial data provider FactSet has attracted interest from private equity firms Thoma Bravo and Hellman & Friedman for a potential acquisition due to a 39% drop in its shares over the last six months, driven by fears of AI disruption [1] - Competitors Morningstar and Gartner have also seen significant share declines of 27.6% and 29.5% respectively, making them attractive targets for acquisition, although the drop in shares is causing private equity firms to reassess potential deals [2] - The selloff in shares has been exacerbated by advancements in AI technology, leading to concerns that AI could replicate the services offered by companies like FactSet, Microsoft, and others, complicating the valuation process for these firms [3] Market Trends - Public market investors are struggling to predict the future of companies in light of rapid advancements in AI technology, which has created uncertainty in the market [4] - Software and data companies, including FactSet, are currently trading at a significant "AI discount," contrasting with their previous premium valuations due to predictable subscription revenues and strong profit margins [4] - FactSet's enterprise-value-to-EBITDA ratio has decreased to around 12, down from 21 in August 2022 and 30 in 2022, indicating a significant decline in its market valuation [5] - Morningstar and Gartner are also experiencing declines in their valuation ratios, currently at 12.6 and 14.8, down from approximately 20 and 23 a year ago [5]