S&P Global Inc. (SPGI) Earnings Call Transcript & Summary

Good morning, and welcome to S&P Global's investor call. I'd like to inform you that this call is being recorded for broadcast. [Operator Instructions] To access the webcast and slides, go to investor.spglobal.com. [Operator Instructions] I would now like to introduce Mr. Mark Grant, Senior Vice President of Investor Relations for S&P Global. Sir, you may begin.

Thank you for joining today's investor call to discuss the successful close of the merger between S&P Global and IHS Markit. Presenting on today's call are Doug Peterson, President and Chief Executive Officer; and Ewout Steenbergen, Executive Vice President and Chief Financial Officer. Yesterday, after the U.S. market closed, we filed an 8-K that included pro forma recast operating results and the related reconciliations. We also issued a press release with our 2022 financial guidance. Both these documents can be found at investor.spglobal.com. In yesterday's 8-K and press release and during the conference call today, we're providing adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the company's operating performance between periods and to view the company's business from the same perspective as management. The 8-K contains exhibits that reconcile the difference between the non-GAAP measures and the comparable financial measures calculated in accordance with U.S. GAAP. The matters discussed in today's conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections, estimates and descriptions of future events. Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. In this regard, we direct listeners to the cautionary statements contained in our Forms 10-K, 10-Q and other periodic reports filed with the U.S. Securities and Exchange Commission. I would also like to call your attention to a European regulation. Any investor who has or expects to obtain ownership of 5% or more of S&P Global should contact Investor Relations to better understand the potential impact of this legislation on the investor and the company. We're aware that we have some media representatives with us on the call as well. However, this call is intended for investors, and we would ask that questions from the media be directed to our Media Relations team whose contact information can be found in the press release. At this time, I'd like to turn the call over to Doug Peterson. Doug?

Thank you all for joining us today to share this historic moment to announce the close of the merger of S&P Global and IHS Markit. S&P Global has an incredibly rich history, over 160 years of building iconic brands and delivering strong performance. Before turning to our merger, I want to take a moment to recognize our colleagues and their families and friends who are impacted by the events in Ukraine. We have mobilized the team from across the company to support our people and assess the potential impacts on our businesses across the region. The merger with IHS Markit gives us a new foundation from which to build what we believe will be a much stronger and more innovative company than what either of us could have delivered alone. As you know, we announced this merger in November of 2020, having begun the work well before the public announcement. I want to extend my sincere thanks to all of those who have worked so diligently for more than a year to help bring this merger to fruition. Today, I'd like to provide an update to our profile and strategy. Then I'd like to talk about the incredible customer value that we plan to build in S&P Global and how that translates into strong growth for the company. Following my remarks, I'll turn it over to Ewout who will walk through our strategic investments, capital allocation plans and financial guidance. Starting with our profile and strategy. When we first announced the merger, we said the transaction would strengthen and accelerate our strategy to power the markets of the future. Over the course of the last 15 months, our confidence in that vision has only grown. As the teams have continued to work to identify synergies, find complementary products and cross-pollinate ideas, it has become clear that this combined company is better positioned than it ever has been to serve our current customers and markets while expanding into large, growing and ever-evolving addressable markets. With our enhanced scale and reach and our combined capabilities, we will be able to offer a differentiated customer value proposition as we continue to put the customer at the core of all we do. We will focus on maintaining excellence in our operations and accelerating the pace of innovation to serve high-growth markets like ESG and private markets while creating sustainable long-term shareholder value. We're focused on delivering the synergies we discussed with you as well as our planned $12 billion in accelerated share repurchases this year. It is our expectation that these actions will combine to drive adjusted earnings per share accretion by the end of next year. S&P Global will innovate and anticipate evolving customer demand more effectively than ever before. We'll be able to deepen and strengthen our position as key strategic partners with our customers. With our new differentiated data sets and analytical capabilities, we'll be able to help customers discover new ways to be competitive and become more efficient and effective in their decision-making. We will also have enhanced capabilities to address the rapidly evolving needs of the participants on both sides of the credit and equity markets, including the private markets. We're better equipped to help companies assess and improve their impact on the planet, their own governance and the communities in which we all live and work through our market-leading ESG initiatives. Combining rich data sets with our expert analysis and the application of AI and machine learning tool sets creates a positive innovation loop and a sustainable advantage for our company and our customers. With the merger now closed, we can fully leverage both S&P Global and IHS Markit internal data on customers, commercial arrangements, product road maps and much more. The teams have done an incredible job of identifying synergies and strategic initiatives over the last 15 months, and now we're thrilled that we can shift fully into integration and execution mode. That allows us to continue what we have been doing for decades: accelerate progress. To help frame how we'll talk about that progress, we'll be reporting our results in 6 divisions, beginning with financial results for the first quarter of this year. The company's operations will be led within these individual divisions but our strategy takes a clear enterprise lens, reflecting our full set of assets. The new combined company has horizontal enterprise advantages across divisions with growth potential from product offerings like benchmarks and analytics. Further potential comes from an expanded addressable market that now includes adjacencies that impact multiple divisions like ESG, private markets and credit and risk management, where we can offer differentiated experiences for our customers and create significant value. S&P Global's foundational capabilities will enable us to fully capitalize on the opportunities ahead. Our long-term goal not just with this merger but with everything we do is to ensure we deliver value to our customers, put our people first, hold ourselves to a high standard of operational excellence and leverage the innovation and technology of digital ecosystems, and we want to do all of this while being mindful of our impact on the planet and society. We have assembled a talented and diverse team of leaders from across both S&P Global and IHS Markit. Many of these faces will be familiar to you. And in the coming months, we plan to give investors ample opportunity to get to know these leaders in more depth. We have the right leaders in place to execute the strategy we've laid out for you, and I couldn't be more thrilled to have this team finally together. Now turning to our growth. We have the market-leading products and iconic brands to truly elevate our success and deliver superior customer value. These leading franchises are highly complementary and will ultimately lead to more rapid innovation to unlock opportunities for long-term revenue growth. You can see from this slide just how powerful our scale, reach and expertise have become. S&P Global now serves over 100,000 customers in over 150 countries. We serve every single one of the global Fortune 100 companies, and we have a direct presence in 45 countries. Combining this customer footprint with the more than 35,000 employees, including over 6,000 market-facing analysts, we can guide our product development teams to make sure that we recognize and address the emerging needs of tomorrow's customers today. The combined assets indexed or benchmarked to S&P Global's indices is over $18 trillion, with $2 trillion in alternative assets tracked by our private market solutions as well. With more than 65,000 articles and research reports published annually, S&P Global continues to be a thought leader across multiple industries and is a trusted source of information and insights for corporate decision-makers and world leaders. All of this culminates in greater growth and operational success in each of our divisions. This slide outlines how we'll present our more diversified business to investors going forward. IHS Markit's Financial Services division will be combined with S&P Global Market Intelligence to form the new Market Intelligence division. The Ratings division will continue largely unchanged. IHS Markit's Resources division will join S&P Global Platts and will be reported as the Commodity Insights division. IHS Markit's Transportation division will be reported as the Mobility division going forward. Indices will combine the relevant products and services of both companies, and IHS Markit's Engineering and Product Design business, which is part of the Consolidated Markets & Solutions or CMS division, will become the Engineering Solutions division. We believe this preserves the strength of each market-leading franchise while allowing us to combine capabilities for innovation and growth. As we outlined when we announced the merger, S&P Global will have a significantly higher mix of recurring versus nonrecurring revenue. On a pro forma basis, recurring revenue would have contributed 76% of total revenue for the combined company in 2021. This represents a 6 percentage point favorable mix shift relative to what S&P Global realized on its own. This higher mix of recurring revenue contributes to an even greater overall stickiness of our top line as well as an even greater stability and predictability of cash flows. Greater predictability of cash flows is just one of the many factors giving us confidence to pursuing emerging high-growth adjacencies. We also see secular tailwinds such as the continued shift of assets from active to passive management, increased usage of ESG overlays in investment decisions and corporate strategic planning and an ever-growing need for reliable information on private markets. Together with credit and risk management, supply chain and multi-asset class data, these emerging opportunities represent an incremental $20 billion addressable market. We believe these key markets will see double-digit growth rates for several years. Continued investments in the combined resources of S&P Global and IHS Markit will result in an expected $350 million in revenue synergies over the next 5 years. Cross-sell opportunities in content and data delivery represent the most obvious opportunities for revenue synergies but we're committed to accelerating the pace of innovation to enhance existing products and develop new products as well. I've been inspired by the work of our teams to identify more than 200 synergy opportunities. That process involved more than 2,000 employees over a 60-week period. The underlying analysis was supported and vetted by multiple third parties in a robust process. It's the rigor behind this analysis, together with the breadth and diversity of opportunities identified, that gives us confidence in our ability to achieve these ambitious targets over the coming years and begin to deliver on day 1. I could not be prouder of the people we have at S&P Global and IHS Markit and the work they've done to set us up for long-term success. These synergies represent just one facet of the tremendous effort by our people. We will continue to invest time and resources with discipline in order to drive greater customer value and ultimately, shareholder value as well. With that, I'll hand it over to Ewout.

Thank you, Doug. Let me start with our strategic investments and capital allocations. As Doug mentioned, we are committed to disciplined investments to drive long-term revenue growth and customer value. In addition to the revenue synergies Doug mentioned, we're committed to driving organic growth. We plan to invest approximately $130 million in ongoing organic initiatives in key areas we plan to prioritize in the near term. These investments align with the strategy to evolve and grow the core business, expand into transformational adjacencies and build upon our foundational capabilities. We expect to invest in both people and technology with a focus on projects with high-growth potential and strong investment returns. Now I want to give you a couple of examples of areas where synergies and strategic investments can drive long-term value creation, starting with energy transition. With S&P Global Platts and IHS Markit's energy and natural resources assets coming together, we believe we have the premier suite of end-to-end energy transition solutions. With the combined global data sets, insights, market prices, supply chain data expertise and broad industry coverage, customers will be able to realize value from S&P Global that we believe was unobtainable from any single data and technology partner until now. One specific use case of this powerful combined solution set is the effort by many companies to achieve net zero carbon emissions by a specific date. More and more companies are setting targets and deadlines to achieve net zero emissions. These companies can leverage Platts' data to gain transparency into voluntary and regulated carbon markets, make carbon assessments, get clarity around carbon intensity of supply chains and make use of our energy transition data. They can leverage IHS Markit's insights on clean energy technologies and climate and energy advisory solutions to develop long-term energy transition strategy and plans. Once those targets are set, companies can utilize granular, well-level data and enterprise-wide emission solutions to measure and report progress over time. The next initiative I want to focus on is ESG more broadly. Most, if not all, of us are familiar with the tailwinds around ESG and the increasing need for companies and investors to have access to accurate and reliable information. S&P Global stands to benefit from these secular tailwinds as we invest to build Sustainable1 as a leading brand in ESG. We outlined in our 2021 TCFD report that our revenue expectations from the ongoing development of ESG would grow at a 42% CAGR through 2025 to reach $380 million. We now expect innovation and revenue synergies to drive higher growth from a larger 2021 base of $140 million for the combined company, driving 2025 ESG revenues of approximately $600 million. That represents a greater than 50% increase in expected ESG-related revenue compared to what we expected for S&P Global prior to the merger. The fundamental principles underlying our capital allocation philosophy are unchanged. We will continue to operate with discipline while still funding organic and inorganic initiatives to accelerate growth. As we outlined in November 2020, we'll target a payout ratio of 20% to 30% of our adjusted diluted EPS, and we'll target capital returns of at least 85% of free cash flow, consisting of both dividends and share repurchases. The combined company will have a target gross debt leverage ratio of 2 to 2.5x. We'll continue to expect free cash flow in excess of $5 billion in 2023 as well. Now turning to our financials and our outlook. At the corporate level, we have taken actions to strengthen our capital structure and generate corporate synergies. As you saw in the press release, we're taking bold steps with our capital allocation to further enhance the value we are creating for shareholders. S&P Global plans to execute a $12 billion accelerated share repurchase program in 2022 with the first tranche of $7 billion launching in the coming days. We expect the remainder of the ASR to be completed by the end of this year. The funding for the ASR comes from 4 sources. First, given the pause in share repurchases since we announced the merger, we have excess cash on the balance sheet. We estimate that the ongoing liquidity and working capital needs of the company require a minimum cash balance of $1.5 billion compared to the approximately $7 billion we have immediately post merger. Second, we estimate net proceeds between $2 billion and $3 billion from the sale of certain businesses required to obtain regulatory approval. Third, we plan to raise additional debt capital to bring growth leverage in line with our target range of 2 to 2.5x. Fourth, the company will allocate most of the free cash flow generated in 2022 to share buybacks. In addition to longer maturities and lower average cost of debt, the optimized capital structure gives us more efficient access to offshore cash flows so we can better execute against our 85% capital return target. These capital and liquidity mechanisms also result in an expected pro forma tax rate of 20.5% to 21.5%, which is favorable compared to the 22.2% to 23.2% tax rate we expected at the time the merger was announced. The scale and structure of the combined company creates true enterprise advantage as well, further enhancing our ability to drive per share accretion over time. Now turning to synergies. We're raising our expectations for cost synergies again, and we now expect approximately $600 million, 25% higher than the initial expectations we shared with you when we announced the merger. It is still our expectation that we will begin to realize cost synergies this year and that 80% of cost synergies will be recognized in 2023. We continue to expect approximately $350 million in revenue synergies, but it is important to note that this is despite the estimated $35 million in revenue synergies lost from divestitures since we announced the merger. Revenue synergies will take longer to realize with the majority recognized after 2023. The EBITA contributions from the combined revenue and cost synergies is expected to be approximately $810 million in 2026. We plan to provide regular updates as we realize both cost and revenue synergies going forward as well as the cost to achieve these significant synergies. Now I would like to turn to 2022 guidance. On this slide, we provide the details of our GAAP guidance, which reflects 10 months of the combined company and 2 months of financial results from S&P Global's premerger operations. This slide outlines our 2022 guidance on an adjusted basis and provide some incremental detail around our EPS and margin expectations. Our adjusted 2022 guidance is based on pro forma expectations of combined company financials, assuming the merger had closed on January 1, which creates an easier comparison with past and future periods. Our guidance assumes post-merger synergy plans will begin March 1. We expect revenue growth in the mid-single digits, following an incredible year of outperformance from both S&P Global and IHS Markit in 2021. We expect corporate unallocated expense of $115 million to $125 million, representing a year-over-year decline of approximately 29% at the midpoint as we realize further cost synergies beyond the $25 million in pre-realized synergies from 2021. We expect to expand operating margin by approximately 130 basis points in 2022, though we still expect margin expansion to average approximately 200 basis points annually through next year. Margin expansion in 2022 will be impacted by several factors. As we told you on the 2 previous earnings calls, there were pre-realized synergies of $25 million in 2021. The timing of the merger close also means fewer months of 2022 in which to realize post-merger synergies. These 2 factors combine for approximately 45 basis points of margin impact in 2022. The margin outperformance in our Ratings business in 2021 creates a high comparison as well, which accounts for the remaining 25 basis point delta between our expected 130 basis points and the 200 basis points average we discussed in November 2020. We expect net interest expense of $370 million to $380 million, reflecting our expectation that we will lower our average cost of debt but increase our total leverage to reach our target range of 2 to 2.5x. As I mentioned earlier, we expect a tax rate of 20.5% to 21.5%. This results in our adjusted diluted EPS guidance of $13.30 to $13.50, representing 14% growth at the midpoint. As a reminder, our adjusted EPS guidance is based on a fully diluted share count, assuming the new shares issued in association with the merger were issued on January 1. This results in a higher share count than we will be reporting on a GAAP basis, which assumes a March 1 close. Assuming a March 1 close, adjusted EPS guidance would have been higher. We expect capital expenditures of approximately $135 million, free cash flow of $4.9 billion to $5 billion and a quarterly dividend of $0.85 per share, which would begin in the second quarter of 2022. To help with modeling, we expect fully diluted weighted average share count of 280 million shares for the first quarter on a GAAP basis, reflecting the March 1 effective close, and 356 million shares on a pro forma basis, assuming a January 1 close. These share counts exclude the impact of any share buybacks. Fully diluted shares outstanding immediately following the close of the merger are 355 million. I'd like to spend a moment providing some more information around the reporting segments we'll be using going forward. As you can see on Slide 30, revenue for S&P Global is more diversified, which we believe strengthens our position as an overall company and increases our ability to deliver shareholder value. Looking at the business by segment. You'll see on the slide our expectations for revenue growth and approximate adjusted operating profit margins. As we told you on our fourth quarter earnings call, we expect positive revenue growth in all our divisions in 2022. Beginning with Market Intelligence. We expect growth in the mid- to high-single digits and margins in the low to mid-30s. As we mentioned on our fourth quarter earnings call, we continue to see strong adoption and use of our Market Intelligence solutions, and we expect that to continue. We also expect Market Intelligence to be one of the larger beneficiaries of cost synergies this year and next year so we expect a bit more margin expansion in MI than in other divisions. In Ratings, we expect low single-digit revenue growth and margins in the mid-60s. After 2 consecutive years of very strong revenue growth and margin expansion, we face high comps in 2022. While we expect capital markets' volatility to result in year-over-year revenue declines in the first quarter, we still expect commercial conditions and the strength of non-transactional revenue to drive positive revenue growth in the full year. With that said, we do not expect material margin expansion in Ratings in 2022 given those high comps. In our commodities division, we expect mid-single-digit revenue growth and margins in the mid- to high 40s. We expect a strong and highly active commodity market to drive solid top line growth and margin expansion in our commodities division. Similar to our Market Intelligence division, we expect commodities to see outsized benefit from cost synergies this year and next year as well. In Mobility, we expect high single-digit revenue growth and margins in the low 40s. While supply chain bottlenecks and inventory challenges will likely continue throughout 2022, we expect to drive increased market penetration of our core products. In the dealer market, we see strong interest in our used car and service offerings, but on the manufacturing side, high levels of uncertainty relating to the supply chain are driving demand for our forecast offerings. In Indices, we expect mid- to high single-digit revenue growth and margins in the high 60s. We expect Indices to continue to benefit from the secular shift from active to passive asset management as well as the stronger platforms of the combined company. In addition, we expect incremental investment in thematic, factor and ESG indices to limit margin upside this year. Lastly, in Engineering Solutions, we expect low single-digit revenue growth and margins in the mid-teens. Revenue growth in even years is slower than in odd years in this segment, primarily due to the publication schedule of the Boiler and Pressure Vessel Code or BPVC. The BPVC is a high-demand product in the Engineering Solutions segment that is only published every 2 years. As such, we expect slower revenue growth in 2022 but faster revenue growth in 2023 in this segment, all else equal. We will give formal 2023 guidance at the usual time next year but wanted to reaffirm the targets we laid out for you in November of 2020 with one slight improvement. First, we continue to expect 6.5% to 8% revenue growth on average through 2023. We also continue to expect 200 basis points of average annual margin expansion through 2023. We realize that our 2022 guidance calls for slightly below that target. However, the additional cost synergies we have identified will have an even greater impact next year, giving us confidence that we will still achieve 200 basis points on average through 2023. We continue to expect in excess of $5 billion in free cash flow in 2023 as well. The improvement I mentioned is that we now expect to reach per share accretion slightly faster than we originally anticipated. We had originally expected it to take 2 full years for us to reach accretion, but with the additional synergies, we now expect the merger to be accretive on a run-rate basis by the end of 2023, slightly ahead of our original time line. We have included an appendix in the slide deck that provides more detail on key products, customers and revenues on each of the 6 segments we introduced today. Recast pro forma operating results and other financial information can be found in the press release we issued yesterday. We encourage investors to look at these materials as well. Before we open it up for questions, I want to take a moment to thank the many colleagues inside of S&P Global and IHS Markit for the countless hours of incredible work that went into bringing this merger to a close. As we move into the work of integration, we feel an incredible sense of energy, optimism, ambition and confidence inside the organization. That energy and confidence come from the immense effort and significant rigor that has gone into our planning and preparations thus far, and we are incredibly excited about the long-term potential of the new S&P Global. With that, I will turn the call over to Mark for your questions.

Thank you, Ewout. [Operator Instructions] Operator, we will now take our first question.

Our first question comes from Manav Patnaik, Barclays.

Congratulations on getting the deal done here. My first question is just around the revenue synergies. I was just hoping if you could help elaborate whether there are certain areas that make up -- any concentration areas, rather, that make up these revenue synergies. Or how diversified is that $350 million number?

Manav, this is Doug. Let me start. But before I get to your question, let me just reiterate what Ewout closed with and how excited we are about the merger and in particular, thanking all of our people from legal, finance, our people team, our technology teams. When I came to the office yesterday morning, the screensaver had changed to a new screensaver. We had a day 1 playbook, so things are off to an excellent start already. Going to your question about the revenue synergies. As you know, the revenue synergies are expected to come later in the 5-year period, in years 3, 4 and 5. But we have a road map of looking at revenue synergies, as you saw in the materials, that we've done a very thorough work across the business teams, looking in the Clean Rooms. And we see, in particular, there are revenue synergies in the Commodity Insights business and Market Intelligence and in Indices, within each of those divisions, if you want to call them intra-divisional -- cross-sell intra-divisional innovation; and then across the organization, through ESG and then into the other businesses, Mobility in particular bringing its expertise into the ESG and energy transition space. Just a couple of examples right off the bat. You can go to our Marketplace today and look at the Marketplace and see that we've added 24 tiles from IHS Markit. As you recall, a few years ago, the Marketplace was one of our growth areas, and we made that a reality. And we're taking advantage of it immediately as we close the deal, so there's 24 titles now from IHS Markit in the Marketplace. As an example, there's a solution software called iLEVEL software. It's for GPs and LPs in the private equity space. You can now get the data for portfolio companies. Another example, we have a Mobility tile. It's for automotive -- global vehicle registrations, which is over 150 countries. It's the new car registrations. And another one is fixed income pricing, which is the intraday as well as end-of-day pricing on 2.3 million sovereign, agency, corporate, securitized and munis. So these are some examples of what we're getting to right out of the box. And we will provide -- be providing a lot more information over time on how we're building our revenue synergies.

And Manav, if I may build on top of that. A couple of, actually, my favorites of the new tiles: the CDS pricing that is there from a data perspective. And then from a tools perspective, we have the Prism Virtual Data Room. This is actually a tool we used ourselves with this transaction so we know firsthand that it is really a very powerful tool. But coming back to your question about some more data around the revenue synergies. So if I want to quantify this for you, you should expect relatively minimal synergies from revenues in 2022. It will be approximately 20% in 2023, getting to 50% in 2024 and about 75% in 2025. If I look at the composition, about 45% of the revenue synergies will be more coming from cross-sell and 55% from new products. And I'm thinking about in which segments those revenue synergies will be reported. The largest synergies will be reported in Market Intelligence and second largest in the Commodity Insight business and then the third largest in the index business. And there are some smaller revenue synergies as well in the other divisions. So that gives you, hopefully, a little bit more perspective of where to expect the synergies and the pace of realizing those revenue synergies.

Absolutely. That's super helpful. And my second question is that I think by the nature of the transaction, I mean, you probably own a lot of assets that you might not have gone after individually. So I'm just thinking -- or looking for color how you will be evaluating the portfolio mix going forward. Like what criteria will be -- will you be using longer term to decide whether this is the right portfolio or not?

Yes, Manav. Of course, we're discussing that and thinking about that question all the time. We are committed to driving growth and success in each of our businesses, and we think that each of our businesses have a position in our portfolio today. And the reason is that we see multiple opportunities of value creation across the enterprise because, in essence, all of our businesses are focused around data analytics, software and workflow tools. Having said that, you know that we are disciplined portfolio managers. We're always looking at our portfolio. And so we will regularly determine if we are the best owners of assets, and we will also continue to do that going forward.

Our next question comes from Kevin McVeigh, Crédit Suisse.

Congratulations on just a great transaction. You talked about kind of the 6.5% to 8% organic growth through '23. That implies, I think, some acceleration in '23 to get to that average. Maybe some of the puts and takes that drive that. And then I don't want to get too specific in terms of longer term, but clearly, that range is an acceleration from each entity independently. Any thoughts as to drivers of that acceleration? Is that pricing, higher retention or just more product innovation just as we think about it longer term, if that's a reasonable proxy for the longer-term growth?

Kevin, 3 reasons why we expect higher revenue growth in 2023. The first is Ratings is looking at high comps for 2021. So the growth is lower this year but we should expect it to come back to more and more growth levels in 2023. The second reason is we're starting to realize more and more revenue synergies next year so that will help. And the third is we're investing in new growth initiatives, and those should also pay off over time. So those are the 3 drivers why we expect higher revenue growth in 2023.

That's great. And then just real quick as a follow-up to that. Any thoughts as to just the synergy comment? It looks like the incremental margins on the revenue is about 60% or so when I just took the revenue delta relative to the contribution. Is that right, Ewout? And is that a reasonable proxy for how we should think about it in terms of the margin contribution from those things and that's on the $350 million of revenue?

I think Kevin, that's right. If you look at the 8-K and the recast financials, you can find the revenues from those divestitures and the operating profit from those divestitures. If you look at that, the effective margins are approximately 60% of those 4 businesses. You have to look at it also from the perspective that these are incremental margins so they are not fully loaded margins. So you have to also take that into account, that you probably need some additional expenses to run those businesses on a stand-alone basis. But indeed, those are the numbers that we put out in the recast last evening.

Our next question comes from Toni Kaplan, Morgan Stanley.

I was hoping you could talk a little bit about the strategy around fixed income indices. This is an area that I think in the past was attractive but you hadn't really been too much in before. Are you expecting to do sort of a rebranding? Or do you think that going in with the Markit name is sort of what you want to do? And just how are you going to sort of work together on new product creation to get sort of the S&P name more into the fixed income area?

Thank you, Toni. This is Doug. This is definitely one of our most exciting growth areas. And when you look at the brands, iBoxx, iTraxx, the credit default products and the credit securities, credit indices that IHS Markit has, those brands are already very well established. We see opportunities from a combination of building what we would call multi-asset class products. We already have some initiatives underway. In particular, there's opportunities in the insurance space where there are needs for multi-asset class products that add a fixed income element. We also see an opportunity in what I would call the ESG space. As an example, we've done very well with our Paris-Aligned and Climate Transition Indices, which are equity indices. And we know that there's interest now for the equivalent of fixed income indices with -- that have a wrapper around them of Paris-Aligned and Climate Transition, so the PACT Indices. So these are a couple of quick examples that we've seen. We're starting to work on those right out of the box. But we do think it's going to be a combination of both brands. We have obviously the very strong S&P Global brand, the Dow Jones brand. We will be continuing to build those in the fixed income space, but we're not going to get rid of the fantastic brands that IHS Markit brings.

That makes a lot of sense. And then one other exciting growth area, I think, that you have is sort of using Kensho with the IHS Data Lake. Any sort of further thoughts on new product creation out of that concept?

Absolutely, Toni. Kensho is ready to start to help the combined company. And they really cannot wait to start to look at the data of IHS Markit and also apply the AI tools to help the new businesses that are being added. So let me give you a couple of examples of that. What Kensho already has been doing is to help the so-called Clean Room to match over 3 million of entities. And why that was important, that was to help the CRM systems of both organizations and therefore, accelerating the identification of revenue synergies going forward. So Kensho has already been helping in that way so that we merge quicker, can go after revenue synergies because of the matching of those entities. Another example is IHS Markit as an expert team that is now going to use Scribe to create transcripts of recorded webinars. So Scribe is already a tool that you know that we're using for earnings call transcripts, but now we will find different use cases also within the company. Another example is with respect to private markets. There is a tool of Kensho called Link that is going to be used to help link 1 million of unstructured private entities and connect it to the IDs of Market Intelligence, the corporate and company IDs of Market Intelligence. And the last example that I can give is in the Engineering Solutions business. There are 2 artificial intelligence initiatives -- new products and initiatives going on. One is called Goldfire, and the other is called UltraViolet. And Kensho can help to further accelerate those initiatives going forward. So in other words, there will be a very high demand for Kensho. It will probably be more a luxury problem we have, how we're going to allocate and prioritize the available capacity across the company over the next period.

That's great. Congrats on closing the deal.

Our next question comes from Alex Kramm, UBS.

I guess just some clarification questions. The first one on the revenue long term -- or 2023 revenue guide, coming back to Kevin's question. So you're saying outlook through 2023 is 6.5% to 8%. Now is that just the average of '22 and '23? Or is it still 2021 to '23? So maybe -- just maybe clarify what exactly the average is because it implies very different things. I think high single digits if you just look at '22 and '23, but obviously a lower number if you average the 3 years. So sorry to have to ask that much detail, but I think it's an important distinction.

No problem, Alex. This is going to be pretty straightforward. It's the average of '22 and '23. So we said mid-single-digit revenue growth in 2022. So you should think about high single-digit revenue growth in 2023 to get to the average of 6.5% to 8%.

All right. Great. Glad I heard that correctly -- or read it correctly yesterday. And then just on the buyback side, this is a longer-term question here. But first of all, again, some uncertainty here. So when you look at the guidance for fiscal year '22, does it actually include the impact of the buybacks? And if so, maybe you can actually help us with what you assume the average share count should be for the year. And then related to that, just very quickly, like I don't think it's in the presentation but where are you starting now in terms of debt to EBITDA? And where do you think you're going to be when you raise financing? I don't think you gave any specific numbers in terms of what you're looking at in terms of raising additional capital and what you're going to be doing with it. And I'm asking, obviously, because the $12 billion is a very solid number. But if I look at your ranges, et cetera, and the free cash flow generation, you clearly could do more if you wanted to. So maybe address all those things here quickly.

Yes. Let me give you a couple of the pieces here, Alex, because I think there were many elements in your question. So first is we have said that the share count at the close is 355 million shares, and that excludes buybacks. What we also have said is that our plan is to buy back $12 billion of shares in this year and that we expect to complete all $12 billion this year in 2022. Obviously, the buyback comes gradually during the course of the year itself. We have the first tranche of $7 billion. Then we need to do another tranche or multiple tranches to get to the $12 billion for the full year. We can't give you, of course, a forecast with respect to what that would mean for share count for the full year because then, implicitly, I would give you the assumption of the price level we expect to buy back, and I can't give that to you for obvious reasons. So that's something that you have to put in the model yourself in terms of an assumption. With respect to the leverage ratio, if we would not upsize our contemplated debt offering, we would be more at the floor of the new range. So that's why it is important for us to do the refinancing plus upsizing when time is appropriate and we think market conditions are attractive because we want to be firmly within the new leverage range as well. Also there, I cannot give you specifics of how much we will upsize because then I would front-run a securities offering, so I also can't do that. But you should expect that we will upsize in order to be more firmly within that new leverage ratio because we don't want to be -- immediately out of the gate, to be at the low end of the new range.

And just to clarify, just quick, so the $13.30 to $13.50, does it include or exclude buybacks? Sorry, just to ask one more time.

That includes buybacks, but of course, the impact during this year comes gradually. And then in 2023, you get the full 12 months of benefit of the share buybacks we will be doing during the course of 2022.

Our next question comes from Hamzah Mazari, Jefferies.

My first question is just around -- are there specific synergy -- are the targets on synergies baked into management comp plans? Or have there been any changes in incentive comp -- sales force incentive comp or management as it relates to post merger relative to sort of S&P stand-alone?

Thanks, Hamzah, for the question. Yes, they have. We have built budgets and plans for 2022 and to 2023 taking into account the processes and procedures we had in the past, which we look at a comprehensive set of what we call a balanced scorecard. We look at our revenue growth. We look at innovation related to our revenue growth, what sort of innovation are we getting from that. We look at our customer profile, including the Net Promoter Score. We look at operations, which includes risk management but also operating statistics. And then we also have a set of people factors. Those are -- which we use to set our targets and our goals, and then we also use that to set our compensation pools. Embedded in that are going to be targets which relate to achieving synergies, achieving the integration of the company and ensuring that we have the right customer profile, et cetera. So yes, the answer to your question is yes, we are going to be incorporating integration targets into our compensation programs.

Got it. And just my follow-up question. Maybe if you could talk about or just update us on your China strategy post merger.

Yes. I'll take that as well. Well, first of all, the China strategy is one that you're aware that we've been having as one of our long-term strategic initiatives. We have the rating agency, which has been off to a great start. We gave you the numbers on the earnings call 3 weeks ago as to how that was proceeding. And we continue to believe that the Chinese financial markets are going to start shifting from being a bank market to a capital market, that we can play a role in that with our data, with our analytics. We also believe that one of the changes that's taking place in the Chinese market is much more interest in data, which are some of the things that IHS Markit and their capabilities bring through some of their pricing methodologies, their pricing tools and their data and analytics tool. So we will continue to invest in China. We do see that as a long-term initiative. And you did see that in the slide that Ewout presented as a part of our 2022/2023 continuing strategic investment program.

Our next question comes from Andrew Steinerman from JPMorgan.

Ewout, I just wanted to jump into that mid-single-digit pro forma revenue growth, Slide 29. You didn't use the word organic for '22. Obviously, you used that work organic for the CAGR between '22 and '23. So I just wanted to make sure mid-single-digit revenue growth is organic. Obviously putting aside that this is pro forma, so I know it includes the IHS acquisition. I just want to make sure that there was no other M&A outside of the IHS merger in that mid-single-digit revenue growth for '22. And I just want to maybe put you on the spot a little bit. When you say mid-single digits, I assume you mean 4% to 6% organic revenue growth, right?

Andrew, it's correct. This revenue growth is organic. So if you look at the recast, we have already excluded the divestitures to have a comparable basis to compare the performance in 2022 for the combined company to the actual performance in 2021. So yes, it's on an organic basis, revenue growth mid-single digits for 2022 for the company combined.

Our next question comes from Ashish Sabadra, RBC Capital Markets.

Let me add my congrats on closing of the deal as well. I just wanted to follow up on the question that Alex asked around the buyback. When I think about it, you're buying back close to 8% to 9% of the company this year. And when I think about the cost synergies, achieving 80% of those $600 million cost synergies by 2023, that is another 8% to 9% accretive to the $13.50 EPS this year. And as you mentioned, you really get the full benefit of the buyback and the cost synergies in 2023. When you had announced the acquisition, you had talked about a mid-teens earnings growth in '23. I understand you'll provide the '23 guidance later. But how should we think about -- with this massive buyback which is really benefiting next year and the cost synergies benefiting next year, how should we think about framework for the earnings growth for '23?

Ashish, thanks for being on the call. Obviously, when we think about the EPS trajectory and the assessment when we will become accretive with this company, we need to look at, indeed, how that compares to the original stand-alone EPS plan we had for S&P Global as well as the impact of all the changes, the synergies, the buybacks, the refinancing, the tax rate and so on, on the trajectory of EPS for the combined company going forward. So what we are looking now at this point is that we will become accretive on a run-rate basis by the end of 2023, and we would expect to be at par for EPS for the full year 2023 and then do expect significant accretion from 2024 onwards. So if you would take that into your model, you could calculate what that would mean for EPS -- expected EPS growth for 2023 over 2022. I'm not going to confirm that with a growth percentage during this call. But when you do the math, you will find out that it is a significant step-up in EPS for 2023 in order to get to that level of being at par for EPS during the full year and getting to that run rate accretion from the end of 2023 onwards.

That's very helpful color. Really appreciate giving that color. And then maybe just a quick question on the ESG and energy transition. Thanks for providing that $600 million run rate by -- in revenues by 2025. I was just wondering. Also from a competitive perspective, with this acquisition, you will have, both on the energy transition as well as ESG, the most comprehensive offering. So how do you think about your competitive positioning improving going forward in this high-growth area of ESG?

Yes. Thank you for that. Well, first of all, we -- as you know, we've been investing from an S&P Global side on our own for the last 8 or 9 years, and we brought together our Sustainable1 organization to accelerate the growth and to ensure that we could have the right approach to markets as well as synergies across those products. We're very excited that IHS Markit is also bringing a set of energy transition and ESG products as well, including energy products coming from their E&R business, which are now part of Commodity Insights. There's information about electric vehicles in the Mobility business. And then there's data products in Market Intelligence. So across all of those, we can build a much stronger suite of ESG products. We do have what I'd call a 3-pronged strategy. We have our own internal strategy. We're working quite aggressively on building a high-growth business. We're also very engaged with the markets. As standards are set around the globe, we think that the standards that are being set will allow us to have an even stronger position in the markets. And then obviously, we have our own sustainable goals for the company. But thank you for the question. We do think this is one of the most exciting growth areas for S&P Global, will be, across the ESG space and Sustainable1.

Congrats once again on the deal.

Our next question comes from Jeff Silber from BMO Capital Markets.

I think you answered an earlier question about the specific segments or divisions where you thought you would get more of the revenue synergies. I was wondering, can we get similar color on the cost synergies? Where should we expect that to happen beyond in the unallocated corporate expense?

Absolutely, Jeff. If you think about cost synergies, the highest benefit will also come in, in Market Intelligence, then in the Commodity Insights business and also in the index business. And then what you will see is that there will be significant cost reduction in the corporate areas, and that will show up both in corporate unallocated as well as in the allocated expenses from corporates. And think about these are areas like enterprise technology, the real estate, some of the corporate functional areas, corporate executives. In the allocation, it means that all of the segments will benefit from a reduction of the expenses in the corporate area. So in the end, you will see some benefits showing up in all of the segments. But again, the biggest beneficiaries of cost synergies will be Market Intelligence, Commodity Insights and indices.

Okay. That's really helpful. And then just to clarify something, Ewout. I think you said -- I'm looking at Slide 29, which is your adjusted guidance for the year, and you're looking for diluted EPS of $13.30 to $13.50. That assumes that the merger closed on January 1. Obviously, it just closed yesterday. Did you say that you expected the actual number to be higher than that $13.30 to $13.50? I guess because you have 2 months less of dilution. Is that correct?

That is correct, Jeff. And the reason why we took that decision is we wanted to make sure that we give you a full year and a first quarter 2022 result that is as comparable with 2021 recast and as well as when we start to report first quarter 2023, you have also the right comparable basis. The drawback of doing that is that we are giving ourselves 2 months of dilution, which didn't really happen because, obviously, the companies were still stand-alone for January and February. So that number has a little bit higher dilution than is in reality, but we think it will help from a comparison basis. And it's simpler going forward in terms of performance assessment. So that's the reason why we have provided that in this way to you today.

Our next question comes from Shlomo Rosenbaum from Stifel, Nicolaus.

My first question centers around kind of the company's Russia-Ukraine exposure. If you could talk a little bit about what the company is doing in those areas and given the events in the last couple of weeks, what the impact is, how you're thinking about it in terms of the growth rate. I mean there's obviously stuff that you guys do in the energy space and commodity, some might be helpful, some might be hurtful. Maybe you can help us think through that initially. Then I have a follow-up.

Thanks, Shlomo. Well, first of all, let me mention that this is a tragedy that none of us can believe that we'll see in this day and age an invasion in -- land invasion taking place in Europe. So with that, let me start by mentioning that we have people in the region. We have people in Russia. We also have contractors in Ukraine, and we have employees and contractors in Belarus. So right now, one of our most important initiatives and our priorities is to ensure that our people are safe. Our security team is monitoring the situation in all of the locations where we have people, ensuring that all of them have what they need so they can be safe. When it comes to the business impact, there's a couple of different ways to look at it. We see that there is business in the countries themselves. And the business that we have in the countries themselves is mostly international business going into those markets. It's not domestic business, so to speak. Our people in those markets are providing global services, whether it's analytical services or development services, to the rest of the organization. So the revenue impact in the region could be -- wouldn't be quite large. It could be quite insignificant, nonmaterial, less than 1% of our revenue. But what's important for us is to see what could be the broader impact to the global markets. We've seen a lot of volatility. As you saw over many months of last year, the VIX had dropped down to the mid-teens level. It was back up over 30 the last couple of days. We've seen much more turmoil in the markets. We've seen people are questioning what will happen with interest rates. So we really are watching the global impact on the markets to see what that could do for the overall market sentiment. But we are watching this very closely. And back to where I started, right now, our #1 priority is our people.

Okay. And then how should we think about pricing for the company with the addition of IHS Markit? Usually, I think the company -- S&P stand-alone would typically get kind of 3% to 4% pricing across the organization on average. Does that metric change with the addition of INFO? Does it go down? Does it go up? Does it stay the same? Maybe you could give us some thoughts on that?

Well, Shlomo, as you know, we have so many different ways that we price our products across the company, and #1 priority for us is to deliver value. We believe that when we deliver value, we can provide a better relationship with a customer, which gives us what I would call a virtuous cycle to be able to get better penetration, better pricing, et cetera. So we know that there's many, many different pricing models across the company. IHS Markit is bringing different pricing models for their enterprise pricing, per seat pricing, data volume pricing, et cetera. So there is no one answer to your question. But what we look at is how we can ensure that we have the best value creation for our customers so that we have very sticky long-term relationships.

Our next question comes from Craig Huber from Huber Research Partners.

The $600 million of annualized cost synergies, can you just maybe just break that down for us on a percentage basis, real estate versus labor versus technology versus corporate, et cetera, however you want to break it down? That's a number -- a big question I get from investors.

Sure, Craig. 60% of that number -- approximately 60% is head count related, and then approximately 40% is not head count related, which is mostly real estate and procurement. And then there are a couple of smaller categories. But it is mostly those 3 main areas where we will have our cost synergies.

And then my follow-up question. Now that the merger has closed, and in coming months, obviously, you'll have a deeper look at the assets and so forth, should we assume you're totally comfortable with all the various businesses you're buying here so there's no more further divestitures down the road? Or could that change?

Well, first of all, we're thrilled that we've been able to close the transaction after 15 months after it's been announced. And we've had a chance over the last 15 months to get to know the businesses better, to know the people better. We see that every single business across S&P Global is deep into analytics, into data, into technology as one of our differentiators. You heard there's a question earlier about the applicability of Kensho and data sciences across the portfolio. We see that this business with deep data that we're providing solutions to customers is one that we're so excited about. So we're very excited about the portfolio that we have in place right now. That doesn't mean that over the long run, we won't apply our long-term history, as you know, of capital allocation. But this business is phenomenal. We're really excited that we've finally been able to come together.

Our next question comes from Owen Lau from Oppenheimer.

Congrats on the merger close. I have a couple of kind of housekeeping questions. And sorry, Ewout, I know you answered a lot of revenue guidance question already. For the margin, 2022, you expect 130 basis point margin expansion, and through 2023, you expect 200 basis point per year. I mean does it mean that we expect around 270 basis point margin expansion in 2023? Is that right way to think about that? And then for buyback, for the remaining $5 billion, would you consider to do it in open market instead of ASR?

Owen, to your first question, the answer is pretty straightforward. Yes, it would mean 270 basis points margin expansion in 2023 to get to the 200 basis points on average. With respect to buybacks and buybacks instruments, we're always looking at all kind of instruments in order to optimize the effectiveness of our buyback programs and make it economically most attractive for the company. But there are, of course, many considerations that you have to take into account. Given the overall size of the buyback volumes, it is very important for us as a company that we can continue to do buybacks during closed windows. And therefore, ASRs are most likely the most effective way because open market purchases can only be done during open windows and you cannot be in possession of any material nonpublic information. So at any point in time, if you do open market purchases, if something happens you become aware of, some information that might be material, then you have to stop your open market share buyback. So therefore, ASRs are the most efficient way to do it because it basically gives us the highest level of certainty that we can execute on the $12 billion during this year.

Got it. That's helpful. And then finally, another quick one on LCD. Does your assumption incorporate the sale of LCD, including the potential loss in revenue, earnings and also accretion from buyback because you get the sale from the proceed?

LCD is excluded from all the numbers that you are seeing. The reason is that you saw, on a historical basis, we have taken out all the divestitures from the recast. And then LCD is currently, from an accounting perspective, held for sale. So for that reason, you also don't see it showing up in our financial results in 2022. So it's already fully excluded for those reasons.

Our next question comes from Jeff Meuler from Baird.

IHS Resources has historically been slower growing structurally and more cyclical than Platts. Maybe the answer is as simple as Platts is just a better business. But do you see any meaningful opportunity, I guess, to raise the growth profile of IHS Resources through -- in the core through like go-to-market and operational execution? Or is it more just about the ESG initiative and the other kind of net new synergy opportunities?

Jeff, thank you for that. Well, first of all, there's -- if you look at the structure of the IHS Markit business, they have more of an information and data and analytics business. We had a little bit more of our preponderance towards benchmarks. In addition, there's the upstream business which, over the last few years, had been in decline. We think that the upstream business is going to actually be a much more interesting business now going forward as people still continue to argue when will be peak oil. There's a lot of interest in what's happening in the entire value chain of the energy market from the wellhead all the way to the pump. And so we believe that this is going to be an area where we can bring our data and analytics expertise together and do much more. So we think that the IHS Markit business is -- probably hit a growth, if you want to call it, trough and that that's now an upside for us as the market starts opening up. And then when you asked about the question of what are some of the synergies in bringing the businesses together, an example I want to give you related to what we're seeing in the energy transition is the interest in gas. We have today a set of products, the North American gas analytics products. We have BENTEK in the IHS -- in the S&P Global Platts side. In the IHS Markit side, they have a set of products called PointLogic, et cetera. Putting those together, we'll be able to have a mapping tool, a data tool, an analytical tool that also brings price benchmarks that no other competitor is going to have. So we think that these are the sorts of things that help with the actual markets themselves as well as energy transition. And then together, we have things like commodity pricing and analytics for hydrogen, for carbon offsets, et cetera. So we think that the 2 businesses together combined are going to be very strong and really, really exciting areas. And one last point, they're both also, generally speaking, businesses that have recurring revenue.

Got it. And then how significant of a change is it going to be for your people in terms of the comp plan harmonization across the companies in terms of amounts, fixed versus incentive based, the steepness of escalators, those types of factors? How similar were the comp plans?

Yes. Thank you. Well, first of all, when it comes to our people, we've been spending time over the last 15 months ensuring that, if you want to call it, the value proposition for our people is strong. We immediately named an executive committee which is now -- yesterday had our very first meeting as a new executive committee together. And we've been able to name the top 2 level of management after that, if you want to call it, the #1 and #2 layers below the executive committee. Those teams now are ensuring that our employees are motivated, that they're inspired, that we're going to be investing in them and growing with them. And when it comes to the compensation programs, we're harmonizing the compensation programs across the 2 companies. The overall compensation profile and methodology as well as our philosophy is to be market-driven and market-oriented and so we're able to pay. In both businesses, there is a couple of slight mix differences, but we'll be able to harmonize those over time. So the philosophy is to be market-driven and ensure that our leaders and our managers are providing motivation and inspiration so that our people love working here as much as we do.

And Jeff, if I may add. One element to this is with the comp remix that Doug just highlighted, it is important to announce that there will be less stock-based compensation going forward and more cash compensation. So it's purely a remix. But the benefit of that is that there will be less dilution going forward from stock-based compensation for the combined company compared to what you used to see within IHS Markit in the past.

Our next question comes from George Tong from Goldman Sachs.

Following up on the earlier revenue questions. You're guiding to mid-single-digit growth in 2022 and implied high single-digit growth in 2023. Understanding Ratings revenue growth will be stronger and more normalized in 2023, can you talk a bit about how the other segments will contribute to the acceleration in growth in 2023 and notable drivers by segment?

It is a little bit too early to give you all the drivers and -- growth and guidance for each of the segments for 2023, George. But directionally, what you should expect is that we would see continued positive secular trends. As you know, we're very embedded in workflows and activities of our customers. We are going to add even more and more value for our customers with the combined company, which will help us from a stickiness perspective. You know that we are having a large base of recurring revenues that are growing over time. Then you should add the synergies -- the revenue synergies on top of it. And I mentioned that those will come in for the first time in 2023, around 20% of the overall revenue synergies to be expected in 2023. So if you add that all up, we believe that we should be well positioned to grow high single digits in 2023. But again, I can't give you the specifics for each of those segments because that might be a bit premature at this point.

Okay. Got it. The 6.5% to 8% is currently presented as a revenue CAGR through 2023. Can you elaborate on whether you see that 6.5% to 8% range as a viable long-term revenue growth target and if you can achieve that organically or if that's inclusive of M&A?

George, what we are planning to do is, later this year, to come back to you with aspirational financial targets. We think that we're getting now 2 years of outlook, more than just the guidance for this year but already a quite clear look-through to 2023. But medium term, which we look at as 2 to -- sorry, 3 to 4 years of an outlook, we think we need a little bit more time. Our new divisional presidents need to get their arms around the combined company, think about their strategies, what they can accomplish. And then we expect later this year to come back to you with aspirational financial targets more for the medium term. So please wait a little bit for that, but we look forward to giving you that update in a couple of months from now.

We will now take our final question from Andrew Nicholas from William Blair.

On Slide 16, you note 76% of combined company revenue is recurring in nature. I was wondering if you might add some additional color to the remaining 24%, specifically in Ratings? How much of that is transactional revenue in Ratings? And maybe you could help us think through the base level of transaction revenue you might expect in a typical year, considering debt that's scheduled to mature and then presumably replaced? Just trying to get a better sense for what within that 24% is somewhat predictable versus not.

Yes. Andrew, the way -- how I look at this is 24% is nonrecurring, but you're right that Ratings transaction is reported as nonrecurring. If Ratings is about 1/3 of the revenue base of the combined company and transaction is about 1/2 of Ratings, so approximately 15-or-so percent of the combined company revenue should come from transaction revenue, so 15% of the 24%. So it is a very large component. And I do want to point out that although we report it as nonrecurring, we know that there's always a very important part of the Ratings transactional business that is coming back, bonds, loans have to get refinanced. So there is this annuity element into that as well. But technically, we're reporting it as nonrecurring because we don't know exactly when those transactions will take place. So to some extent, you could say that the recurring element, if you include the transaction base of Ratings, is actually much higher than the 76%.

Right. No, makes sense. That's mostly what I was getting at. I appreciate that. And then for my follow-up, I just was hoping you could walk through a few examples or use cases of synergy opportunities on the private asset side. I know you mentioned in your prepared remarks about combining Market Intelligence private company data with some of the IHS workflow tools. But any additional color on that private asset opportunity? Some of your competitors are obviously very, very interested in that space as well, so some potential examples would be great.

Yes. Thank you. And when you look at the private asset side, just think of the -- first of all, the growth of the private assets. Private equity have been holding assets much longer. The sponsors are holding assets much longer. We start from the position of strength with a tool like the iLEVEL tool, which has information for GPs and LPs. It allows them to manage their portfolios, to monitor their portfolios. And then we have other products which bring along the information of specific debt itself. We have some products which are providing more of the supply chain for the third party, the KY3P, which is a third-party and vendor risk product. So when you look across private assets, you have a combination of going to the private equity investors themselves, you have the SME and the value chain of supply chains with products like KY3P. We also have a couple of products that provide prices of mark-to-market tools also for private assets and loans. So you start looking at the suite of products that we can provide for the entire value chain of investing, originating, managing, overseeing and then going to the market with private assets. We think that it's a fantastic suite. There's a team that's already starting to look at this as of yesterday. They were planning along the way, and as of yesterday -- now they're working on this. And this is one of the areas that we're quite excited about. So thank you, Andrew. Thanks for the question. Thank you. Well, let me close the call with a couple of remarks. And first of all, I want to thank everyone again for joining the call and for your questions, for your support. We are so excited about this merger of S&P Global and IHS Markit. We've had 15 months to learn, to plan, and we're now ready to execute and to integrate. And we will be investing in our people. We'll be investing in innovation. You're going to see us addressing the questions that you asked today, which were excellent questions about where we are going to see growth, how we're going to achieve our synergies, how we're going to be creating new products in these areas we've talked about like ESG, energy transition, private markets. But in order to do that, we're going to do it with our people. I want to thank our people. They've been working tirelessly over the last 15 months to ensure that the integration is ready to go the day of close. We're continuing to grow our businesses, deliver to our customers, and we're still in the pandemic. So I always have these calls and thank our people for having really learned new ways to work during the pandemic, and we're still in the middle of that. But again, I want to thank everyone for joining the call. I look forward to being back with you within the next couple of months to give you an update on our first quarter as a combined company. And so again, thank you, everyone, for joining us. We're so excited that this is our first day that we can work together as S&P Global. Thank you.

That concludes this morning's call. A PDF version of the presenter slides is available now for downloading from investor.spglobal.com. Replays of the entire call will be available in about 2 hours. The webcast with audio and slides will be maintained on S&P Global's website for 1 year. The audio-only telephone replay will be maintained for 1 month. On behalf of S&P Global, we thank you for participating and wish you a good day.