NASDAQ will acquire Risk Management company Adenza from US Private Equity company Thoma Bravo in a US$10.5 billion cash and common stock deal.

Holden Spaht, a Managing Partner at Thoma Bravo, Adenza’s parent firm, is anticipated to join an expanded NASDAQ board post-acquisition.

Adenza was established through the merging of two major global brands – Calypso and AxiomSL. With its end-to-end treasury, risk, and collateral management workflows, Calypso assists capital markets participants, while AxiomSL provides regulatory and compliance software for financial institutions.

The integration of Adenza into NASDAQ‘s portfolio will augment its Marketplace Technology and Anti-Financial Crime solutions, and significantly broaden its services in regulatory technology, compliance, and risk management. After the Adenza acquisition from Thoma Bravo is completed, NASDAQ will be able to offer unparalleled support to financial institutions, creating a multi-asset class, full trade lifecycle platform paired with regulatory technology solutions.

Adenza is projected to boost NASDAQ’s financial profile by growing the Solutions Businesses revenue from 71% to 77% by 2023, and enhancing the adjusted EBITDA margin to 57%. Moreover, it is expected to add around $300 million to NASDAQ’s annual unlevered pre-tax cash flow.

“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 Adena Friedman, Chair and Chief Executive Officer, Nasdaq.

“This transaction is an endorsement of the entire Adenza team and what we have built with Thoma Bravo, from our market-leading products to the immense value we have delivered for our customers,”

said Didier Bouillard, Chief Executive Officer at Adenza.

The acquisition aligns with NASDAQ’s strategic goals, and will extend NASDAQ’s reach in the European banking system and increase its standing in the North American and Asia Pacific regions, positioning the company to better meet global demand for risk management and regulatory solutions.

The acquisition meets NASDAQ’s mergers and acquisitions criteria, enhancing performance and valuation potential, while meeting clear financial requirements. Post-acquisition, NASDAQ’s enterprise-wide return on invested capital is expected to exceed 10% by the fifth year.

To finance the acquisition, NASDAQ will pay $5.75 billion in cash and issue 85.6 million shares of its common stock to Adenza’s owners, a company controlled by Thoma Bravo, representing approximately 14.9% of the outstanding NASDAQ shares. NASDAQ plans to issue approximately $5.9 billion of debt between signing and closing the deal.

After the transaction, NASDAQ will continue with its existing capital deployment plan, which includes steadily increasing its dividend per share and achieving a dividend payout ratio of 35-38% within three to four years. The company also plans to repurchase shares over time to offset dilution from the transaction.

Featured image credit: Adena Friedman, Chair and Chief Executive Officer, Nasdaq. Background image edited from Freepik.

Article first appeared on Fintechnews.ch.