US$10.5 billion is the price that Nasdaq has put on technological transformation that may boost its bid to become “the trusted fabric of the world’s financial system”. The exchange operator recently revealed its agreement to acquire fintech firm Adenza for the large sum, in an announcement that shocked some investors and caused its share price to drop by more than 10 percent to a one-year low.
The acquisition, which will be Nasdaq’s biggest ever, is expected to be completed in six to nine months. The total sum will comprise US$5.75 billion in cash and 85.6 million shares of Nasdaq common stock. The Thoma Bravo-owned Adenza is a software provider for treasury, risk, and compliance management. In a press release announcing the deal, Nasdaq states its belief that the acquisition will allow it to “provide comprehensive support to financial institutions, establishing a multi-asset class, full trade lifecycle platform with unmatched regulatory technology solutions”.
According to coverage by Reuters, investors have taken issue with the fact that the value of the deal is almost 18 times the US$590 million expected revenue for Adenza in 2023. Nasdaq plans to issue US$5.9 billion in new debt to finance the acquisition, a move that will bring the firm’s leverage to historically high levels. Critics have warned that this will weaken its risk profile. However, Nasdaq has intentions to bring its debt level down in 18 months.