Nasdaq to Buy Adenza for $10.5 Billion

(Photo Credit: Luis Villa del Camp/Flickr)
(Photo Credit: Luis Villa del Camp/Flickr)

Sign up for smart news, insights, and analysis on the biggest financial stories of the day.

Nasdaq is tapping the Andrew Carnegie playbook on vertical integration.

On Monday, the financial market that operates stock exchanges in New York, Boston, and Philadelphia, agreed to purchase software company Adenza for $10.5 billion. It marks not only Nasdaq’s most expensive deal in its 52-year history, but also the latest move by stock exchanges to diversify beyond transaction services to offer data and risk management as well.

Finding Fintech

Adenza — a merger of Calypso Technology and AxiomSL — makes treasury management systems. We won’t bore you explaining terms like “end-to-end trading” and “regulatory compliance solutions.” In layman’s terms: It keeps track of money and makes sure companies are reporting it properly and not spending it stupidly so that they can earn even more money.

Nasdaq’s purchase of Adenza from private equity group Thoma Bravo wasn’t the first of its kind, and it likely won’t be the last. In 2020, the Intercontinental Exchange, which owns the New York Stock Exchange, purchased mortgage software specialist Elli Mae — another former Thoma Bravo company — for $11 billion. A year after that, the London Stock Exchange acquired Refinitiv, one of the world’s largest providers of financial markets data, for a whopping $27 billion. It’s easy to see why stock exchanges are going on a fintech shopping spree:

  • By nature, exchanges and the individual stocks within them are going to experience volatility. Whether it’s a regional bank bubble, a worldwide pandemic, or OPEC slashing its oil production, nothing on the markets is guaranteed safe. Exchanges view financial management services as more stable ways of generating revenue.
  • Nasdaq CEO Adena Friedman said she wants to bolster the company’s software endeavors, which now accounts for more than a third of its annualized recurring revenues, Bloomberg reported.

“We’re trying to make sure we’re buying the best-in-breed companies to solve and serve clients so that we can really be the best partner we can be to banks and brokers around the world,” Friedman told Bloomberg.

Will it Pay Off? But even these seemingly safer ventures can be a crapshoot. When markets closed last Friday, Nasdaq’s own share price was down roughly 6% year-to-date. Following the announcement of the Adenza deal, its share price fell another 11% on the day at market close. It was investors’ way of saying they weren’t immediately thrilled by the news, even if Adenza is expected to generate $590 million of revenue this year.