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Nasdaq Completed its biggest-ever Acquisition of Adenza from Thoma Bravo

On 1st November 2023, Nasdaq announced the completion of its biggest-ever acquisition of the software provider Adenza from Thoma Bravo, a leading software investment firm. The $10.5 billion deal comprised $5.75 billion in cash and $85.6 million shares of Nasdaq common stock, based on the volume-weighted average price per share over 15 consecutive trading days prior to signing. The transaction is part of Nasdaq’s strategy to shift resources into offerings with more predictable revenue streams. It also gives private equity firm Thoma Bravo a seat on Nasdaq’s board and a 14.9% stake, making it one of the company’s largest shareholders. Goldman Sachs and JP Morgan are acting as financial advisors to Nasdaq. Qatalyst Partners serves as lead financial advisor to Thoma Bravo and Adenza, along with Barclays, Citi, Evercore, HSBC, and Jefferies.

Nasdaq is the second-largest stock exchange in the US, best known as the listing home of names such as Apple and Meta. Apart from operating the exchange, the New York-based company also provides clients, including investors and both publicly traded and privately held firms, with services such as data, analytics, software, and various surveillance offerings. Adenza is a fast-growing software company created through the combination of two highly respected and well-recognized global brands – Calypso and AxiomSL. It provides mission-critical risk management, regulatory reporting, and capital markets software to the financial services industry.

Adding Adenza to Nasdaq’s portfolio allows Nasdaq to offer extensive support to financial institutions, establishing a powerful, multi-asset class platform for the entire trade lifecycle, featuring unmatched regulatory technology solutions. The deal also brings in a loyal and growing client base with 98% gross retention and 115% net retention. This move increases Nasdaq’s Solutions Businesses to 77% of total revenue, from 71% in June this year. “Prior to this deal, we did not have a full offering of products,” Nasdaq President Tal Cohen said in an interview. “When we combine, we can deepen relationships with existing customers, selling them more.”

In addition to the strategic alignment between the two companies, Adenza’s robust financial profile presents a compelling opportunity and is expected to enhance Nasdaq’s organic revenue and operating margins. Nasdaq expects to realize $80 million of annual run-rate net expense synergies by the end of the second year following the acquisition and $100 million in revenue synergies over the long term. Nasdaq remains committed to reaching its leverage targets of 4.0x within 18 months and ~3.3x within 36 months following the closing.

Following the announcement of completion, Nasdaq’s share price closed at 2% lower than the opening price, at $49.79 and $48.71 respectively. Overall, this $10.5 billion purchase of a premium software and technology company broadens Nasdaq’s liquidity and integrity platforms by incorporating top-notch risk management, regulatory, and capital markets software and technology solutions. The key determinant of this deal's success hinges on the extent of alignment between the companies. “We have to make sure we cultivate this the right way so five years from now we look back on this moment and realize how far it took us.”, according to Cohen.

Written by: Chi (Camila) Le

Sources: Nasdaq, Private Equity Insights, Financial Times, Yahoo!Finance

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