The end of the merger between the LSE and Deutche Borse has come as no surprise. Merging two lumbering old-economy giants was always unlikely to make a substantial difference. The LSE will have to join up with someone who understands technology to deliver future shareholder value.
The London Stock Exchange's current management is under fire. The company's board just scraped re-election at yesterday's AGM, amid enormous criticism. This is unsurprising, given the recent failure of iX, as well as the LSE's general failure to deliver potential shareholder value. But it's less obvious what will happen next.
A takeover by Nasdaq is one possibility. It could have helped run the Frankfurt-based technology market if iX had happened, but is under no obligation to stick with the Deutsche Borse as a partner. This is the preferred option of smaller companies with LSE holdings, according to The Association of Private Client Investment Managers and Stockbrokers (whose members control 25% of the LSE).
But it's not clear that Nasdaq shareholders want to pay the whole cost, which will be over a $1 billion. And there are other strong contenders. Deutsche Borse still wants the LSE, and may well launch its own hostile takeover bid. OM will probably increase its bid, although many LSE shareholders will be reluctant to accept an all- or mostly-share offer. Liffe, the London futures market, may want to create a unified European-style exchange in London. And the Euronext tie-up with Paris, Amsterdam, and Brussels is definitely a background possibility.
So what will happen? Two outcomes are possible, irrespective of the names of the companies. The LSE could merge with an existing European old-economy bourse and both would gracefully decline slower than otherwise. Or it could be taken over by a firm that actually understands how to deliver potential shareholder value, deal with technology issues (ranging from tech stock IPOs to flexible up-to-date software), and drive growth.
Whether the bourse is OM or Nasdaq matters little. But at some point, LSE shareholders must choose one of them. There's no point in exchanging one dinosaur for another.