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Nasdaq (NDAQ) to Acquire Adenza to Boost Business Segments
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Nasdaq, Inc. (NDAQ - Free Report) has agreed to acquire a premium software and technology company, Adenza Group, Inc. from a leading software investment firm, Thoma Bravo. The deal is projected to close within six to nine months, subject to regulatory approvals and other customary closing conditions.
About Adenza
Adenza is a software application provider that specializes in Capital Markets, Investment Management, Central Banking, Risk Management, Clearing, Collateral as well as Treasury and Liquidity. This technology company is created through the combination of two well-recognized global brands, such as Calypso and AxiomSL. The company provides risk management and regulatory compliance solutions that enable financial institutions to consolidate and streamline its operations.
Adenza is a high-growth business with around $590 million of 2023E revenue and organic revenue growth of approximately 15%. It also has an annual recurring revenue growth of 18%, and an adjusted EBITDA margin of 58%. The company boasts a growing client base, with gross retention of 98%, net retention of 115% and a durable mix of nearly 80% recurring revenues.
Financing the Deal
Nasdaq will purchase Adenza for $10.5 billion, comprised of $5.75 billion in cash and 85.6 million shares of Nasdaq, based on the volume-weighted average price per share more than 15 consecutive trading days prior to signing.
Rationale Behind the Deal
The acquisition is expected to boost Nasdaq’s Marketplace Technology and Anti-Financial Crime solutions as well as strengthen offerings across a wider spectrum of regulatory technology, compliance and risk management solutions.
With this buyout, NDAQ will possess a complete suite of essential software and technology solutions that can manage risks, comply with regulations more efficiently for the clients and will be able to provide comprehensive support to financial institutions.
The transaction enables Nasdaq to serve an expanded client base with multi-asset-class and cloud-enabled risk and regulatory management solutions. With the acquisition, Adenza will bring additional relationships across the European banking system to Nasdaq’s strong presence in North America and the Asia Pacific region.
The Acquisition Improves Nasdaq’s Outlook
The acquisition is estimated to increase Nasdaq’s annualized recurring revenue as a percentage of 2023 pro forma total revenues to 60% from 56% in 2022 and grow Nasdaq’s Solutions Businesses as a percentage of 2023 pro forma total revenues to 77%. It also increases Nasdaq’s Solutions Businesses medium-term organic revenue growth outlook from 7-10% to 8-11%. The deal further betters Nasdaq’s adjusted EBITDA margins from 55% to 57% on a 2023 pro forma basis and includes approximately $300 million of annual unlevered pre-tax cash flow. The buyout is expected to enhance Nasdaq’s growth, margins and revenue quality and deliver non-GAAP diluted EPS accretion by the year-end.
Nasdaq expects to achieve $80 million in run-rate net expense synergies by the end of year two. The transaction is also anticipated to reveal additional value through cross-sell opportunities, with anticipated run-rate revenue synergies of $50 million in the medium term and $100 million over the long term.
Nasdaq intends to pursue its existing capital deployment plan, including steadily increasing its dividend per share and dividend payout ratio to achieve 35-38% within three to four years. NDAQ aims to repurchase shares over time to partially offset dilution from the transaction in addition to continuing to offset employee share-based compensation.
Inorganic Growth Story
Nasdaq has grown meaningfully over the years through a number of strategic expansions. These acquisitions have helped the company gain direct access to the Canadian equities market, expand its technology offering and improve its market surveillance techniques. The company’s acquisitions of eVestment, Cinnober and Quandl have enhanced its capabilities and been accretive to its results. NDAQ’s focus on growth via acquisitions and organic initiatives, which aided entry into new markets and helped it gain cross-selling opportunities, bodes well.
Price Performance
Shares of this Zacks Rank #3 (Hold) company have gained 4.9% in the past year, outperforming the industry’s increase of 1.5%. Solid fundamentals should help the stock retain the momentum.
Axis Capital beat estimates in three of the last four quarters and missed in one, the average being 6.50%. In the past year, AXS has lost 1.5%.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $7.74 and $8.60, indicating a year-over-year increase of 33.2% and 11.1%, respectively.
RLI Corp. beat estimates in each of the last four quarters, the average being 43.50%. In the past year, RLI has gained 16.8%.
The Zacks Consensus Estimate for RLI’s 2023 and 2024 earnings has moved 10.1% and 3.7% north, respectively, in the past 30 days.
Root beat estimates in each of the last four quarters, the average being 18.24%. In the past year, the insurer has lost 73%.
The Zacks Consensus Estimate for ROOT’s 2023 and 2024 earnings per share indicates a year-over-year increase of 43.8% and 42.5%, respectively.
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Nasdaq (NDAQ) to Acquire Adenza to Boost Business Segments
Nasdaq, Inc. (NDAQ - Free Report) has agreed to acquire a premium software and technology company, Adenza Group, Inc. from a leading software investment firm, Thoma Bravo. The deal is projected to close within six to nine months, subject to regulatory approvals and other customary closing conditions.
About Adenza
Adenza is a software application provider that specializes in Capital Markets, Investment Management, Central Banking, Risk Management, Clearing, Collateral as well as Treasury and Liquidity. This technology company is created through the combination of two well-recognized global brands, such as Calypso and AxiomSL. The company provides risk management and regulatory compliance solutions that enable financial institutions to consolidate and streamline its operations.
Adenza is a high-growth business with around $590 million of 2023E revenue and organic revenue growth of approximately 15%. It also has an annual recurring revenue growth of 18%, and an adjusted EBITDA margin of 58%. The company boasts a growing client base, with gross retention of 98%, net retention of 115% and a durable mix of nearly 80% recurring revenues.
Financing the Deal
Nasdaq will purchase Adenza for $10.5 billion, comprised of $5.75 billion in cash and 85.6 million shares of Nasdaq, based on the volume-weighted average price per share more than 15 consecutive trading days prior to signing.
Rationale Behind the Deal
The acquisition is expected to boost Nasdaq’s Marketplace Technology and Anti-Financial Crime solutions as well as strengthen offerings across a wider spectrum of regulatory technology, compliance and risk management solutions.
With this buyout, NDAQ will possess a complete suite of essential software and technology solutions that can manage risks, comply with regulations more efficiently for the clients and will be able to provide comprehensive support to financial institutions.
The transaction enables Nasdaq to serve an expanded client base with multi-asset-class and cloud-enabled risk and regulatory management solutions. With the acquisition, Adenza will bring additional relationships across the European banking system to Nasdaq’s strong presence in North America and the Asia Pacific region.
The Acquisition Improves Nasdaq’s Outlook
The acquisition is estimated to increase Nasdaq’s annualized recurring revenue as a percentage of 2023 pro forma total revenues to 60% from 56% in 2022 and grow Nasdaq’s Solutions Businesses as a percentage of 2023 pro forma total revenues to 77%. It also increases Nasdaq’s Solutions Businesses medium-term organic revenue growth outlook from 7-10% to 8-11%. The deal further betters Nasdaq’s adjusted EBITDA margins from 55% to 57% on a 2023 pro forma basis and includes approximately $300 million of annual unlevered pre-tax cash flow. The buyout is expected to enhance Nasdaq’s growth, margins and revenue quality and deliver non-GAAP diluted EPS accretion by the year-end.
Nasdaq expects to achieve $80 million in run-rate net expense synergies by the end of year two. The transaction is also anticipated to reveal additional value through cross-sell opportunities, with anticipated run-rate revenue synergies of $50 million in the medium term and $100 million over the long term.
Nasdaq intends to pursue its existing capital deployment plan, including steadily increasing its dividend per share and dividend payout ratio to achieve 35-38% within three to four years. NDAQ aims to repurchase shares over time to partially offset dilution from the transaction in addition to continuing to offset employee share-based compensation.
Inorganic Growth Story
Nasdaq has grown meaningfully over the years through a number of strategic expansions. These acquisitions have helped the company gain direct access to the Canadian equities market, expand its technology offering and improve its market surveillance techniques. The company’s acquisitions of eVestment, Cinnober and Quandl have enhanced its capabilities and been accretive to its results. NDAQ’s focus on growth via acquisitions and organic initiatives, which aided entry into new markets and helped it gain cross-selling opportunities, bodes well.
Price Performance
Shares of this Zacks Rank #3 (Hold) company have gained 4.9% in the past year, outperforming the industry’s increase of 1.5%. Solid fundamentals should help the stock retain the momentum.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the finance sector are RLI Corp. (RLI - Free Report) , Axis Capital Holdings Limited (AXS - Free Report) and Root, Inc. (ROOT - Free Report) . While RLI Corp. sports a Zacks Rank #1 (Strong Buy), Axis Capital and Root carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Axis Capital beat estimates in three of the last four quarters and missed in one, the average being 6.50%. In the past year, AXS has lost 1.5%.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $7.74 and $8.60, indicating a year-over-year increase of 33.2% and 11.1%, respectively.
RLI Corp. beat estimates in each of the last four quarters, the average being 43.50%. In the past year, RLI has gained 16.8%.
The Zacks Consensus Estimate for RLI’s 2023 and 2024 earnings has moved 10.1% and 3.7% north, respectively, in the past 30 days.
Root beat estimates in each of the last four quarters, the average being 18.24%. In the past year, the insurer has lost 73%.
The Zacks Consensus Estimate for ROOT’s 2023 and 2024 earnings per share indicates a year-over-year increase of 43.8% and 42.5%, respectively.