Exchange provider Nasdaq has acquired risk management and regulatory software firm Adenza in a US$10.5 billion deal, its biggest ever: made up of US$5.75 billion in cash and 85.6 million shares of Nasdaq stock.
Nasdaq will issue shares to Adenza owners Thoma Bravo, representing approximately 14.9% of the outstanding shares of Nasdaq.
Nasdaq’s share price lost around 12% on the news yesterday, the vast majority of which (9.8%) was lost in pre-market trading before the markets opened at 9.30am EST. At market opening, Nasdaq shares were worth US$52.46, closing the day (12 June) at US$51.
In recent years exchanges have looked to pivot away from listings, leveraging their substantial reserves to diversify their operations.
Most recently, capital market firm Deutsche Börse agreed to acquire software firm SimCorp. Nasdaq appears to have taken aim at the fintech sector, with a number of acquisitions already under its belt including Metrio, a provider of environmental, social and governance (ESG) data collection, analytics and reporting services based in Montreal.
The acquisition will allow Nasdaq to establish a “holistic” multi-asset class, full trade lifecycle platform with regulatory technology solutions built in, just as financial institutions increasingly face evolving global regulations, increasingly sophisticated financial crime and pressures to modernise infrastructure.
Announcing the deal, Nasdaq chair and CEO Adena Friedman said the acquisition represents a “major milestone” for Nasdaq, and will boost the firm’s growth, cash flow, margins and quality of revenue.
The Adenza acquisition, Friedman added, will “supercharge” Nasdaq’s capabilities across critical functions, asset classes and geographies and comes at a time when consolidation of the banking sector presents an opportunity for regulatory and risk management.
“There are 5,000 banks in the US alone, thousands around the world, all of which represent a US$16 billion addressable market as they look to expand into new markets – and therefore, new regulatory environments,” Friedman said. “More regulatory challenges present an opportunity.”
Additionally, emerging technologies, while representing opportunities for financial institutions, also create risk. In this climate, Friedman said the acquisition of Adenza “allows us to support clients more broadly and more deeply – as a partner, not a vendor”.
Friedman added that the services of both firms complement one another “without overlapping”, and while the acquisition is expected to deliver on accretion by the end of year two it is “instantly accretive” to the firm’s growth rate.
Once the dust has settled, Nasdaq expects anticipated run-rate revenue synergies of $50 million in the medium term and US$100 million over the long term.
Additionally, Holden Spaht, a managing partner at Thoma Bravo, is expected to be appointed to Nasdaq’s board of directors, expanding the board’s headcount to twelve.
Adenza, which was created through the merger of two firms, Calypso and AxiomSL, serves a market worth US$10 billion and which is growing 8% a year. Nasdaq hopes the deal will see its Serviceable Available Market (SAM) increase by 40% to US$34 billion.
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