Nasdaq said it will buy Thoma Bravo-owned software firm Adenza for $10.5 billion as it speeds up its push to become a more tech-focused company.
The purchase, consisting of $5.75 billion in cash and 85.6 million shares of Nasdaq common stock, is expected to help growth at the stock exchange operator, which is trying to diversify under Chief Executive Officer Adena Friedman.
Nasdaq said it intends to issue about 14.5 percent of its outstanding shares to the owners of Adenza, which is controlled by Thoma Bravo.
Adenza, which makes software used by banks and brokerages, is expected to hit about $590 million in annual 2023 revenue, Nasdaq said.
“With Adenza, we will have a more complete suite of essential software and technology solutions that make managing risks and complying with regulations simpler and more efficient for our clients,” said Tal Cohen, president of Market Platforms at Nasdaq.
The exchange operator also said it has received fully committed bridge financing for the cash part of the transaction, and plans to issue about $5.9 billion of debt between the signing and the closing of the deal, expected within six to nine months.
The company has increasingly looked to move its business away from market sensitive exchange operations and chosen to lean into the financial software offerings for institutional investors.
Nasdaq has reported revenues of $914 million (+2 percent) during the first quarter of 2023.
Adenza’s Calypso serves capital markets participants with end-to-end treasury, risk, and collateral management workflows, and AxiomSL supports financial institutions with leading regulatory and compliance software.
Adenza brings an attractive financial profile, with approximately $590 million of 2023E revenue, organic revenue growth of approximately 15 percent, annual recurring revenue growth of 18 percent, and an adjusted EBITDA margin1 of 58 percent.
Adenza has a growing client base, with 98 percent gross retention, 115 percent net retention, and a durable mix of approximately 80 percent recurring revenue. The addition of Adenza is projected to enhance Nasdaq’s financial profile by growing Solutions Businesses revenue from 71 percent of total revenue today to 77 percent in 2023E, increasing adjusted EBITDA margin to 57 percent, and adding approximately $300 million of annual unlevered pre-tax cash flow.