Nasdaq to buy Adenza for $10.5bn in US exchange operator's biggest deal; Acquisition of software company highlights trend to spread into stable revenues like data and risk management Antoine Gara and Jennifer Hughes and Donato Paolo Mancini - Financial Times Nasdaq is acquiring financial risk software company Adenza for $10.5bn in its largest-ever acquisition, as the world's big exchange operators diversify from transactions into more stable revenue streams like data and risk management. The cash and stock acquisition is expected to "significantly" enhance Nasdaq's offerings in regulatory technology, compliance and risk management, the company said. It comes as competitors like London Stock Exchange Group and Intercontinental Exchange have bought businesses focused on data and software. /jlne.ws/45XTno4 FT is a subscription service.
Nasdaq to Acquire Financial-Software Firm Adenza for $10.5 Billion Deal represents the biggest acquisition in company’s history By Alexander Osipovich Updated June 12, 2023 4:18 pm ET Nasdaq CEO Adena Friedman has been working to transform Nasdaq into a more tech-centric company. PHOTO: BRENDAN MCDERMID/REUTERS Nasdaq NDAQ -11.81%decrease; red down pointing triangle has agreed to acquire Adenza, a maker of software used by banks and brokerages, in a $10.5 billion cash-and-stock deal that represents the most ambitious move yet in Chief Executive Adena Friedman’s efforts to reshape her company. If completed, the Adenza deal would represent the biggest acquisition in Nasdaq’s history. Since assuming the CEO job in 2017, Friedman has sought to transform Nasdaq from an operator of marketplaces—whose income fluctuates with trading volumes—to a more tech-centric company with steadier revenue. Investors have generally rewarded her efforts to diversify Nasdaq’s revenue mix away from the volatile, highly competitive business of running stock and options exchanges. But the market balked at the price tag of the Adenza deal, as shares of Nasdaq tumbled 12% on Monday, making it the worst-performing stock in the S&P 500 for the day. The seller in the transaction is private-equity firm Thoma Bravo, which is poised to get 14.9% of Nasdaq’s shares outstanding as part of the deal, making it one of Nasdaq’s largest shareholders. Nasdaq, Adenza and Thoma Bravo unveiled the deal in a press release Monday, after the transaction was earlier reported by The Wall Street Journal. Adenza provides software to help manage trading, risk management and post-trade processing in markets such as currencies, fixed income and derivatives. Its technology also streamlines the process of reporting data to regulators, a task that has become increasingly time consuming for banks due to the Dodd-Frank Act and other rules imposed after the 2008 financial crisis. Advertisement - Scroll to Continue Based in London and New York, Adenza says its clients include the majority of banks that regulators have deemed systemically important. Friedman has moved the company beyond its historical roots in running exchanges, building on a strategic shift that began under her predecessor, Robert Greifeld. Among its businesses, New York-based Nasdaq sells market data to asset managers and provides brokers with software to detect market manipulation. In 2020 Nasdaq agreed to a $2.75 billion deal to buy Verafin, a software company that helps banks detect money laundering and fraud. The Adenza deal would allow Nasdaq to sell Verafin’s anticrime services to a broader array of banks, Friedman said in an interview. “This is an incredibly exciting deal for us as we continue to transform the company into a leading technology company that serves the industry,” she said. Trading accounted for about 28% of Nasdaq’s net revenue last year. With the Adenza acquisition, that percentage is projected to dwindle to about 23%, according to Nasdaq. Adenza is projected to book about $590 million in revenue this year, according to Monday’s press release. Last year, Nasdaq had $3.6 billion in net revenue. New York-based Nasdaq is paying about 31 times Adenza’s adjusted earnings before interest, taxes, depreciation and amortization, based on its projected financials for 2023. By comparison, tech companies in the S&P 500 have an average market capitalization of 17 times adjusted Ebitda. Underscoring the risks for Nasdaq, S&P Global Ratings downgraded the company’s long-term issuer credit ratings to triple-B from triple-B-plus, citing the $5.9 billion in debt that Nasdaq plans to take on to finance the deal. Nasdaq said it was committed to reducing its debt burden during the three years after the deal. It justified the price tag by pointing to Adenza’s hefty profit margins and its potential to make Nasdaq an indispensable provider of technology to the world’s biggest banks. Nasdaq is paying for the Adenza transaction with $5.75 billion in cash and 85.6 million shares of its common stock. To offset the dilutive impact of new shares being issued to Thoma Bravo, Nasdaq said it plans to repurchase shares over time. Nasdaq said it expects the Adenza acquisition to begin having a positive impact on its per-share earnings after two years. Monday’s selloff in Nasdaq shares was “a knee-jerk reaction” to the acquisition’s cost and Nasdaq’s plan to use its own stock to fund part of it, said Oppenheimer analyst Owen Lau. “But you have to think about how this deal could transform Nasdaq into a totally different company,” he added. “They’re trying to look like an information-services company, or a software company, rather than an exchange.” The deal is expected to close in six to nine months, pending regulatory approval and other customary closing conditions, the companies said. Thoma Bravo hasn’t disclosed how much it paid for the businesses that make up Adenza. The company is the result of the 2021 merger of two firms, Calypso Technologies and AxiomSL. The private-equity firm acquired AxiomSL in 2020. The next year, Thoma Bravo merged Calypso into AxiomSL and renamed the combined firm Adenza. Nasdaq’s competitors have also done megadeals to diversify their business mix, with varying degrees of success. London Stock Exchange Group’s share price is little changed from where it stood when the company closed its $15 billion transaction to buy data provider Refinitiv Holdings in January 2021. Meanwhile, Intercontinental Exchange—owner of Nasdaq’s crosstown rival the New York Stock Exchange—has pursued several big-ticket deals in mortgage data and technology.
Ironic might not the best word to use (can't think of what is?) but it just seems a little weird to read :- "But the market balked at the price tag of the Adenza deal, as shares of Nasdaq tumbled 12% on Monday, making it the worst-performing stock in the S&P 500 for the day." Yup know it has been in the index for years. Still......
$50 billion market cap - all stock deal so a dilution of $10 billion. I would read that as the market likes the deal.
Needs to hold $49 area which seems likely if markets overall continue higher:- If not guess you see what next lower support would be.
MERGERS AND ACQUISITIONS Nasdaq to Buy Adenza for $10.5 Billion (Photo Credit: Luis Villa del Camp/Flickr) Nasdaq is tapping the Andrew Carnegie playbook on vertical integration. On Monday, the financial market that operates stock exchanges in New York, Boston, and Philadelphia, agreed to purchase software company Adenza for $10.5 billion. It marks not only Nasdaq’s most expensive deal in its 52-year history, but also the latest move by stock exchanges to diversify beyond transaction services to offer data and risk management as well. Finding Fintech Adenza — a merger of Calypso Technology and AxiomSL — makes treasury management systems. We won’t bore you explaining terms like “end-to-end trading” and “regulatory compliance solutions.” In layman’s terms: It keeps track of money and makes sure companies are reporting it properly and not falling victim to an Office Space-esque scheme. Nasdaq’s purchase of Adenza from private equity group Thoma Bravo wasn’t the first of its kind, and it likely won’t be the last. In 2020 Intercontinental Exchange, which owns the New York Stock Exchange, purchased mortgage software specialist Elli Mae — another former Thoma Bravo company — for $11 billion. A year after that, the London Stock Exchange acquired Refinitiv, one of the world’s largest providers of financial markets data, for a whopping $27 billion. It’s easy to see why stock exchanges are going on a fintech shopping spree: • By their very nature, exchange trading volumes are inherently volatile. Whether it’s a regional bank bubble, a worldwide pandemic, or a sleepy August with traders decamped to the Hamptons — trading volume is rarely stable. Exchanges view financial management services as more stable ways of generating revenue. • Nasdaq CEO Adena Friedman said she wants to bolster the company’s software endeavors, which now accounts for more than a third of its annualized recurring revenues, Bloomberg reported. “We’re trying to make sure we’re buying the best-in-breed companies to solve and serve clients so that we can really be the best partner we can be to banks and brokers around the world,” Friedman told Bloomberg. Will it Pay Off? But even these seemingly safer ventures can be a crapshoot. When markets closed last Friday, Nasdaq’s own share price was down roughly 6% year-to-date. Following the announcement of the Adenza deal, its share price fell another 11% on the day by market close. Consider it a shareholder's version of buyers remorse. - Griffin Kelly - Morning Brew email newsletter
Nasdaq Seeks Predictability in Deal to Buy Thoma Bravo’s Adenza Nasdaq Seeks Predictability in Deal to Buy Thoma Bravo’s Adenza Katherine Doherty and Amy Thomson Mon, June 12, 2023 at 5:08 PM EDT (Bloomberg) -- Nasdaq Inc.’s biggest-ever acquisition is supposed to make the exchange operator more predictable and profitable. Investors may need more convincing. Monday’s proposed $10.5 billion purchase of financial-software maker Adenza sent shares of Nasdaq tumbling to their biggest intraday drop in nearly a decade — even as the exchange’s Nasdaq 100 index continued on a rally that has boosted the benchmark by 35% this year. The cash-and-shares deal also gives a stake in the public stock exchange to the private equity firm that owns Adenza, Thoma Bravo, along with a seat on the board. By some accounts, Nasdaq is paying a rich price, and it’s taking on so much debt that S&P Global Ratings immediately cut Nasdaq’s credit grade. But Chief Executive Officer Adena Friedman said she’s working to build Nasdaq’s software business, which now accounts for more than a third of its annualized recurring revenues. Software sales to financial firms are steadier, insulating the business from trading volatility. “We’re trying to make sure we’re buying the best-in-breed companies to solve and serve clients so that we can really be the best partner we can be to banks and brokers around the world,” Friedman said in an interview. At the end of Monday’s trading, Nasdaq was down almost 12% to $51, off 17% for this year. Some analysts voiced concern over the sale price, with a valuation roughly 18 times Adenza’s sales, which “isn’t particularly attractive,” Bloomberg Intelligence analyst Paul Gulberg wrote. At Keefe, Bruyette & Woods, analyst Kyle Voigt predicted the deal will start adding to earnings in its third year, and “investors will eventually warm to the deal, although this could take time.” More immediately, S&P downgraded Nasdaq’s credit rating to BBB from BBB+, citing increased debt that would “weaken the company’s financial risk profile.” On the bright side, S&P cited opportunities for cross-selling, “because it seems that only a handful of Nasdaq’s current clients overlap with those of Adenza.” Tech Leads While Nasdaq is the second-largest stock exchange in the US, it bills itself as a technology company. Beyond running the exchange, the New York-based firm offers data, analytics, software and other surveillance services to clients including publicly traded and closely held companies and investors. Adenza sells software to banks, asset managers, exchanges and other parts of the financial services industry that helps manage regulatory reporting, compliance and risk management. The business was formed in 2021 when Thoma Bravo merged Calypso Technology and AxiomSL. The deal would place Thoma Bravo among Nasdaq’s largest shareholders. The private equity firm is known for its investments in software companies and manages more than $120 billion in assets. Friedman said Nasdaq approached Thoma Bravo on the deal, which will also see managing partner who led the investment, Holden Spaht, appointed to the board. It’s not the first or biggest deal Thoma Bravo has done with a public exchange business. Intercontinental Exchange, owner of the New York Stock Exchange, bought a mortgage technology company, Ellie Mae, from Thoma Bravo in 2020 for $11 billion. Nasdaq, for its part, has been trying to become less dependent on transaction-based revenue and data tied to trading, which fluctuates, Friedman said. With the acquisition of Adenza, Nasdaq expects to increase its solutions businesses to 77% of total revenue from 71% today, with an even larger addressable market, she said. The firm has been focused on diversifying its revenue sources beyond the exchange business. In recent years Nasdaq has made investments in software, data and other offerings. It also expanded technology tied to protection and anti-crime software through its acquisition of Verafin, with products that help investigate and report instances of money laundering, fraud and manipulation for banks and trading firms. Adenza has more than 60,000 users across global and regional banks, broker-dealers, insurers, asset managers, pension funds, hedge funds, central banks, stock exchanges and clearing houses, securities-services providers and corporates. It estimates $590 million of revenue for this year. Nasdaq plans to issue $5.9 billion of debt for the acquisition, which will bring its leverage to 4.7 times by the completion of the deal, which is expected in six to nine months. It plans to reduce that leverage to 4 times within 18 months. Bloomberg LP, the parent company of Bloomberg News, competes with Adenza in providing trading and risk solutions. ©2023 Bloomberg L.P.
%% OK, but that maybe was the climatechange ad smeared in the middle of that article?? Data worked real well for WO'N + Company, but they created those+ no climate change scam. I cant comment much on the price, safe to assume they did not do it for a daytrade 12% loss does seem steep, most M&A buyers, Carl Ichan + such were good gains + single digits % loss.