Shares of Nasdaq, Inc. (NASDAQ: NDAQ) plunges by over 11% in the pre-market trading session today. This sudden decline in shares price comes after the financial services corporation agreed to buy financial-software maker Adenza from its private equity owners. This deal marks the exchange operator’s largest-ever transaction.
The acquisition, valued at $10.5 billion in cash and stock, was confirmed by Nasdaq in a statement released on Monday. As part of the deal, Thoma Bravo, the buyout firm that currently owns Adenza, will receive a 14.9% stake in Nasdaq and a seat on the board.
CEO Adena Friedman expressed her intention to strengthen Nasdaq’s software business, which now contributes over a third of the company’s annualized recurring revenues. This strategic focus on software sales to financial firms not only enhances predictability but also safeguards the business from the volatility inherent in trading activities.
In an interview, Friedman stated, “We’re striving to acquire the best-in-breed companies to serve our clients and become the best possible partner to banks and brokers worldwide.”
Adenza specializes in providing software solutions to banks, asset managers, exchanges, and other sectors of the financial services industry. Their software aids in regulatory reporting, compliance, and risk management. The company was formed in 2021 through the merger of Calypso Technology and AxiomSL, both owned by Thoma Bravo.
Nasdaq, the second-largest stock exchange in the US, positions itself as a technology company. In addition to operating the exchange, the New York-based firm offers data, analytics, software, and surveillance services to a diverse range of clients, including publicly traded and privately held companies, as well as investors.
Friedman emphasized Nasdaq’s efforts to reduce dependency on transaction-based revenue and trading-related data, which can be subject to fluctuations. With the acquisition of Adenza, Nasdaq anticipates that its solutions business will account for 77% of total revenue, up from the current 71%, thereby expanding its market reach even further.
In recent years, Nasdaq has been actively diversifying its revenue sources beyond the exchange business. The company has made strategic investments in software, data, and other offerings. It also strengthened its technology portfolio related to protection and anti-crime software through the acquisition of Verafin. These products aid banks and trading firms in investigating and reporting instances of money laundering, fraud, and manipulation.
Headquartered in London and New York, Adenza offers end-to-end trading, treasury, risk management, and regulatory compliance platforms. These platforms can be deployed on-site or via the cloud. Adenza serves a broad client base, including global and regional banks, broker-dealers, insurers, asset managers, pension funds, hedge funds, central banks, stock exchanges, clearing houses, securities services providers, and corporations.
The estimated revenue for Adenza this year is approximately $590 million. The acquisition is subject to regulatory approvals and customary closing conditions, with completion expected within six to nine months, as stated by Nasdaq.
