Nasdaq Inc. today announced plans to acquire Adenza Group Inc., a major provider of financial software, in a deal worth $10.5 billion.

The stock exchange operator will raise about $5.9 billion in debt to carry out the transaction. Nasdaq plans to pay $5.5 billion in cash for Adenza and finance the rest of the deal with 85.6 million of its own shares. According to the company, those shares amount to about 15% of its outstanding stock.

“The acquisition of Adenza brings together two world-class franchises steeped in market infrastructure, regulatory, and risk management expertise at a time when financial institutions are navigating some of the most complex market dynamics in history,” said Nasdaq Chief Executive Officer Adena Friedman.

Besides operating its namesake stock exchange, Nasdaq runs more than a half dozen other financial markets in the U.S. and Europe. Moreover, it sells software to other financial institutions. The acquisition of Adenza will enhance the latter part of Nasdaq’s business. 

Adenza sells software tools that financial institutions use to ensure their business operations comply with regulations. The tools can collect data about an organization’s financial activities, check for signs of compliance issues and display the results in a dashboard. Adenza’s software also eases related tasks, such as ensuring the data used in a dashboard is accurate. 

Another set of applications provided by the company helps financial institutions carry out trades. Adenza’s software portfolio includes, among other products, a platform that banks can use to access market data and purchase stock. A simulation tool enables users to test the effectiveness of new investment tactics before implementing them. 

Adenza counts six of the world’s 10 largest asset management firms among its customers. According to the company, its technology helps more than 60,000 financial professionals manage about $25 trillion worth of assets.

Adenza is owned by Thoma Bravo, which formed it in 2021 by merging two software providers called Calypso and AxiomSL. Thoma Bravo bought Calypso in 2021 for a reported $3.7 billion and is believed to have spent $2 billion the year prior for most of AxiomSL’s shares. As a result, the private equity firm likely stands to realize a major return on investment by selling Adenza to Nasdaq for $10.5 billion.

Nasdaq, in turn, will use the acquisition to grow its software business. Thoma Bravo disclosed today that Adenza generates about $590 million in annual sales. Moreover, the company has a 15% revenue growth rate.

Nasdaq expects the acquisition to unlock cross-selling opportunities that will make it possible to further grow Adenza’s top line. The stock exchange operator hopes to realize “run-rate revenue synergies” of $50 million in the medium term and $100 million in the long term. Overall, Nasdaq believes the deal will expand its serviceable addressable market by $10 billion.

The company is also counting on the deal to increase its profitability. Nasdaq’s adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, margin is projected to improve by 2% after it completes the acquisition. The profitability improvements will be partly driven by $80 million in annual cost synergies that the company hopes to realize.

Nasdaq expects to close the transaction within six to nine months.

Image: Nasdaq