September 13, 2011

Equifax Inc. 

 

 - 29 - 

In addition to the Company’s operations in the aforementioned countries, Equifax has equity interests 

in credit information businesses in Brazil (15%), Russia (33%) and India (49%). These investments should 

further diversify the Company’s exposure away from the U.S. and allow it to benefit from the growth of middle 

class populations in these emerging markets.  

Industry Overview - Competitive Advantages and Market Overview and Potential 

Equifax is one of only three large global players (Experian and TransUnion are the primary 

competitors) in the credit reporting and credit information businesses and currently boasts a number one or 

number two market share in most of its major markets.  

Equifax - Global Market Share 

 

Source: Company presentation, August 2011 

 

Competitive Advantages and Industry Overview 

In our view, Equifax’s competitive advantages reside in the Company’s 100+ year history of building, 

maintaining and analyzing large databases of credit information. It would be virtually impossible to replicate 

many of the Company’s databases as well as the proprietary analytical tools utilized to create customized 

insights, decision-making solutions and processing services for businesses.  Although the Company licenses 

credit related algorithms from Fair Isaac Corporation (FICO) and the FICO score remains well recognized in 

the industry, the number of online transactions that include an Equifax analytical component continues to 

increase. During the 2Q11, 39 % of EFX’s online transaction volume within the OCIS business unit included an 

analytical component from an Equifax model vs. 32% in 2Q10 and up from 23% in 1Q08. While Equifax 

generally obtains the data for its databases on favorable terms (in some cases free) and the data is typically 

not provided on an exclusive basis, we believe barriers to entry for the business are extremely high. Institutions 

that provide Equifax credit and wealth data need to be assured that they are handing over the data to a 

Company that has the infrastructure in place to keep the data secure.  

Equifax derives the bulk of its revenue from its U.S. operations where there are just three major 

national players (Experian and TransUnion are the other two). We believe this bodes well for a rational pricing 

environment given the oligopoly type industry composition. Further, we would also note that peer TransUnion 

has become heavily levered (~5x debt to EBITDA) in conjunction with Madison Dearborn’s investment. While 

TransUnion’s leverage may be reduced if the Company completes its pending IPO, TransUnion’s leverage 

would still likely be at elevated levels.  

---

Equifax Inc. 

 

 - 30 - 

U.S. Credit Information - Market and Growth Potential 

Although the U.S. is generally considered a mature/developed market, the market for business 

information services is large and growing. According to recent data from industry researcher Veronis Suhler 

Stevenson (VSH), spending on business information in the U.S. was $51.6 billion in 2009 of which $11 billion 

was attributed to spending on credit and risk information. VSH expects that credit and risk information spending 

will grow at a 6.4% CAGR between 2009 and 2014.  

Emerging Markets Overview 

Emerging markets should present good growth opportunities for the Company. A recent report 

(April 2011) by the International Monetary fund projects that in 2012 the average GDP of emerging markets is 

projected to grow at 2.5x the rate of developed markets. As emerging markets continue to develop and mature, 

these economies should experience favorable socio-economic trends including an expanding middle class that 

increasingly makes use of financial products and services. We believe that Equifax is well positioned with a 

presence in a number of high growth emerging markets.  

Personal Solutions Overview and Outlook 

Equifax currently derives just 10% of its business from consumers globally (9% in the U.S.). The direct 

to consumer market is a relatively new market for the industry with Equifax releasing its first consumer product 

in the early 2000s. The advancement of the Internet has allowed companies to target and deliver products to 

this market more efficiently and cost effectively. According to credit industry researcher Javelin Strategy and 

Research, the market for online credit monitoring and identity theft protection services is $2.4 billion. With 

identity theft ranking as the top consumer complaint received by the FTC during 2010, coupled with financial 

institutions’ reluctance to lend and stricter lending standards, individuals have become more interested in 

understanding their credit profile. Accordingly, consumers are increasingly accessing their credit reports and 

purchasing credit monitoring services. Equifax currently boasts the number 1 consumer market share in the 

U.S., Canada, and in a number of markets in Latin America.  

U.S. Consumer Information Solutions (USCIS) 

The U.S. Consumer Information Solutions Segment (USCIS) is the Company’s largest segment and 

consists of three product and service lines. The following illustrates USCIS revenue by product and service 

line: 

USCIS - Revenue by Business Unit ($MM) 

Online 

Consumer 

Information 

Solutions

66%

Mortgage 

Solutions

15%

Consumer 

Financial 

Marketing 

Services

19%

 

 

$485.1 

$113.5 

$144.3 

Total USCIS Revenue: $742.9 

---