Nasdaq Inc., one of the major stock exchanges in the US, has acquired financial software provider Adenza from its private equity owners. According to a Monday statement, the purchase, valued at $10.5 billion in cash and equity, is the exchange operator's largest-ever transaction.

The private equity company that controls Adenza, Thoma Bravo, will obtain a 14.9% interest in Nasdaq and board participation. However, the news severely affected Nasdaq's shares, which dropped significantly intraday on Monday morning, reaching a low of up to 11%, the lowest since March 2020, according to Bloomberg.

Nasdaq CEO Adena Friedman wants to grow the exchange operator's software division, which accounts for over one-third of its annual recurring revenues. By concentrating on software sales to financial institutions, Nasdaq hopes to develop a more stable income stream and insulate the company from market volatility.

For banks, asset managers, exchanges, and several other segments of the financial services business, Adenza specializes in offering software solutions. It provides regulatory reporting, compliance management, and risk management. Under Thoma Bravo's ownership, Calypso Technology and AxiomSL merged to establish the business in 2021.

Nasdaq's purchase of Adenza is part of its industry-wide attempt to diversify its technology and IP portfolio. Nasdaq has been on an acquisition binge since the stock trading sector opened to broker competition in 2005. In 2007, it bought Nordic markets owner OMX for $3.7 billion, International Securities Exchange for $1.1 billion in 2016, and Verafin for $2.75 billion in 2020, as per a Reuters report.

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Nasdaq Shares Drop Due To Debts

However, worries over Adenza's price tag resulted in a dip in Nasdaq's shares. The acquisition comprises $5.75 billion in cash and 85.6 million Nasdaq shares. Several market experts raised concerns regarding Nasdaq's indebtedness and the purchase price.

As part of the agreement, Nasdaq intends to give the Thoma Bravo-controlled shareholders of Adenza a near-15% ownership stake in the company. Thoma Bravo may also appoint a Nasdaq board member with this ownership interest. Based on Friday's closing price, the newly issued shares represent 17.4% of Nasdaq's outstanding shares and are worth $4.95 billion, per Market Watch.

Nasdaq has acquired "fully committed" bridge financing and plans to issue $5.9 billion in debt between the signing and conclusion of the transaction to cover the cash component. The bridge commitment will be replaced with debt proceeds.

Adenza is anticipated to produce $590 million in sales in 2023, with recurring revenue growing 18% annually.

While the more extensive S&P 500 index has witnessed a rise of 12.3% over the same period, Nasdaq's stock performance has been subpar this year, down by 14.5 percent.

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