Nasdaq, the prominent exchange operator, has announced its largest acquisition to date, with plans to purchase Adenza, a software firm owned by Thoma Bravo, for a whopping $10.5 billion.
This move reflects Nasdaq’s strategic efforts to transform into a more technology-focused company and diversify its portfolio of intellectual property.
The equities trading market has undergone significant changes since 2005 when regulations opened it up to competition from brokers, prompting Nasdaq and its peers to seek new avenues for growth.
Nasdaq’s acquisition history demonstrates its commitment to expanding its technological capabilities. In 2007, the company acquired OMX, the owner of Nordic markets, in a deal worth $3.7 billion.
This was followed by the purchase of International Securities Exchange in 2016 for $1.1 billion. In 2020, Nasdaq made headlines with its acquisition of Verafin, a software firm specializing in anti-financial crime solutions, for $2.75 billion.
These acquisitions have allowed Nasdaq to broaden its scope and tap into emerging markets and technologies.
However, news of the Adenza acquisition initially led to a nearly 10% decline in Nasdaq’s shares, as concerns arose about the potential for overpayment.
The $10.5 billion deal comprises $5.75 billion in cash and 85.6 million shares of Nasdaq common stock.
Michael O’Rourke, the chief market strategist at JonesTrading, expressed skepticism, pointing out that Nasdaq, previously a $28 billion company, was taking on significant leverage for an acquisition that values Adenza at 18 times its revenues.
The agreement with Thoma Bravo includes the issuance of a near-15% stake to Adenza’s owners and grants the private equity firm the right to appoint a nominee to Nasdaq’s board.
While this arrangement has raised some concerns among investors, Nasdaq argues that the acquisition will enhance the medium-term organic revenue growth outlook for its Solutions Businesses, which are responsible for designing and developing financial software for investors. The company expects the deal to elevate the revenue growth range from 7%-10% to 8%-11%.
Nasdaq’s $10.5 Billion Adenza Deal
Adenza specializes in creating software for banks and brokerages, and Nasdaq anticipates the company will generate approximately $590 million in annual revenue by 2023.
Nasdaq’s CEO, Adena Friedman, highlighted the growing importance of emerging technologies such as artificial intelligence and cloud computing in the financial industry.
She believes these trends will continue to gain traction, and Nasdaq intends to support its clients in integrating these technologies into their businesses.
The acquisition of Adenza is projected to close within six to nine months, marking a significant milestone in Nasdaq’s journey toward becoming a technology powerhouse.
Nasdaq is renowned for its technology products, which it sells to exchanges and financial institutions worldwide. The company’s decision to pursue this acquisition aligns with its long-term strategy to strengthen its position in the market and remain at the forefront of technological innovation.
To facilitate the transaction, Nasdaq has enlisted the services of Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC as financial advisors. Meanwhile, Thoma Bravo and Adenza have secured the expertise of Qatalyst Partners LP as their lead financial advisor.
While some investors remain cautious due to the premium paid for Adenza and Nasdaq’s leverage reduction efforts, the exchange operator is confident that this acquisition will drive its growth and position it as a leader in the ever-evolving technology landscape of the financial industry.
With its expansion into software solutions and its commitment to embracing emerging technologies, Nasdaq is poised to navigate the challenges and opportunities that lie ahead, ultimately delivering greater value to its shareholders and clients.
The acquisition of Adenza by Nasdaq for $10.5 billion is expected to have a significant impact on both companies and the financial industry as a whole.
Nasdaq’s move to become a more tech-focused company aligns with the evolving market landscape and the growing importance of technology in the financial sector.
While concerns have been raised about the premium paid for Adenza and Nasdaq’s leverage, Nasdaq believes the acquisition will enhance its revenue growth and strengthen its position as a leader in financial software solutions.
With this strategic acquisition, Nasdaq aims to capitalize on emerging technologies and deliver innovative solutions to its clients, ultimately driving its long-term growth and value creation.
