Nasdaq, Inc. (Nasdaq: NDAQ), a global technology company, and
Verafin, an industry pioneer in anti-financial crime management
solutions, today announced that they have entered into a definitive
agreement for Nasdaq to acquire Verafin for US$2.75 billion in
cash, subject to customary adjustments. The agreement will combine
Verafin’s comprehensive suite of anti-financial crime management
products with Nasdaq’s reach and established regulatory technology
leadership to create a global SaaS leader in the fight against
financial crime, a worldwide problem that demands innovative
action.
Based in St. John’s, Newfoundland and Labrador and
founded in 2003, Verafin provides more than 2,000 financial
institutions in North America a cloud-based platform to help
detect, investigate, and report money laundering and financial
fraud. Verafin’s products are powered by intelligent analytics and
leverage machine learning, robust shared data insights and powerful
visualization and investigation tools to increase detection
accuracy and reduce costs for clients. Verafin emphasizes a
holistic approach to eradicating financial crime and its platform
supports a consortium of several of the largest global banks as
they collaborate to detect financial crimes to support law
enforcement investigations.
The acquisition strengthens Nasdaq’s existing
regulatory technology and anti-financial crime solutions, which
include its renowned Nasdaq Trade and Market Surveillance offering,
its Buy-side Compliance product, as well as the Nasdaq Automated
Investigator for anti-money laundering (AML). Verafin’s
capabilities will be available to the global network of nearly 250
banks, exchanges, broker-dealers and buy-side organizations, and
regulatory authorities that rely on Nasdaq’s technology to detect
market manipulation and abuse today. Nasdaq believes that its deep
relationships with the majority of leading Tier 1 and Tier 2 banks
globally will accelerate Verafin’s strategy of displacing legacy
providers and manual processes with its cloud-based,
state-of-the-art, market-proven solution.
“At the core of Nasdaq’s mission, we champion
fairness and integrity in the markets that we build and in the
broader financial ecosystem in which we operate, and combatting
financial crime is central to achieving our goals. Verafin’s
innovative fraud and AML detection platform, combined with Nasdaq’s
leading trade and market surveillance solution, will empower Nasdaq
to play an increasingly important role in building stronger
economies around the world,” said Adena Friedman, President and
Chief Executive Officer, Nasdaq. “The intelligent technology
solutions Verafin has created are second-to-none, and that is
evident in the company’s extraordinary growth and stellar client
retention. Together with Verafin’s founders and employees, we look
forward to building Nasdaq into a global leader in anti-financial
crime management solutions. Additionally, we are committed to
supporting innovation and growth in St. John’s and Newfoundland and
Labrador. We believe that Verafin will not only complement and grow
our existing presence in Canada, but also represents a potential
catalyst for further investment opportunities in the province and
the country.”
Friedman continued, “In addition to Verafin’s
significant contribution to Nasdaq’s strategic ambitions, the
acquisition also furthers our goal to be a premier provider of
cloud-based SaaS solutions to the global capital markets and
beyond. This combination meaningfully accelerates the evolution of
our business mix toward highly scalable, subscription revenue.”
Anti-financial crime technology represents a large
and growing sector with structural and regulatory tailwinds.
Financial institutions face significant challenges in detecting and
preventing financial crime, and therefore invest significant
capital and resources in combatting an ever-increasing threat to
the integrity of the global financial system. Up to US$2 trillion
in laundered money flows through the financial system annually
according to the United Nations, and criminals continue to find
sophisticated methods for moving funds undetected. Automation and
vendor solutions, a US$13 billion market according to Oliver Wyman,
have become increasingly attractive solutions for financial
institutions.
“This investment by Nasdaq, a global leader in
financial technology, is a major vote of confidence and a
significant win for the Province of Newfoundland and Labrador’s
technology and innovation sector. Nasdaq’s clear commitments to the
Province will help foster prosperity and opportunity throughout the
community as we continue to grow our business,” said Jamie King,
Chief Executive Officer, Verafin. “Since we began discussions with
Nasdaq, we felt their DNA strongly mirrored our own core values:
innovation, teamwork, entrepreneurship, and a commitment to
continued growth and development. Together with Nasdaq, we will be
a clear leader in expanding the fight against illicit finance by
delivering our capabilities to a global client base from our
headquarters in St. John’s.”
Nasdaq’s Investment in St.
John’s, Newfoundland and Labrador and Canada
Nasdaq is committed to growing Verafin’s business
and creating opportunities for their employees. Nasdaq’s investment
will help Verafin expand its position as an economic and technology
leader from its base in St. John’s and within the province of
Newfoundland and Labrador.
To this end, Nasdaq will make the following
commitments:
- Verafin’s headquarters will proudly
remain in St. John’s and its executive leadership team will remain
in place and continue to lead the company’s growth.
- Nasdaq highly values the skills and
expertise of Verafin employees and will invest to both maintain and
increase local employment levels to fuel Verafin’s growth.
- In order to foster the next
generation of talent in the province and help support Verafin’s
growing employment base, Nasdaq will work closely with Memorial
University to grow its scholarship program at the University,
enhance its co-op programs, and fund and supervise at least six
Mitacs fellowships annually for Masters and PhD students.
- Nasdaq sees great potential in the
innovation ecosystem of St. John’s and will increase investment in
Verafin’s research and development. This will include an investment
in a new US$1 million R&D partnership project with The Genesis
Centre, Newfoundland and Labrador’s pre-eminent innovation
hub.
- In addition, Nasdaq admires the
extensive charitable and community support that Verafin has
provided to date and will increase Verafin’s level of charitable
giving as the company continues to grow.
Financial Impact and Value
Creation
The transaction meets all of Nasdaq’s acquisition
investment criteria:
- Verafin is a strong strategic and
cultural fit, accelerating Nasdaq’s evolution into a technology,
analytics and infrastructure provider. The transaction is expected
to increase revenue contribution from the highest-growth Market
Technology and Investment Intelligence segment to 47% (from 44%) of
total Nasdaq net revenue2 pro forma for the third quarter of
2020.
- It is expected to enhance Nasdaq’s
performance and valuation potential, in particular by accelerating
organic revenue3 growth outlook within its Solutions Segments to
6-9% (from 5-7% previously).
- The acquisition of Verafin is
expected to deliver EPS accretion beginning in 2022 and meet
Nasdaq’s ROIC, or return on invested capital, and IRR
objectives.
Verafin has grown at a compound annual revenue
growth rate of approximately 30% over the last three years. Verafin
expects to deliver in excess of US$140 million4 in revenue in 2021,
representing an implied multiple of approximately 19.5x revenue, in
line with high-growth SaaS companies.
Verafin’s results will be reported within Nasdaq’s
Market Technology segment. As a result, Nasdaq is raising its
Market Technology segment’s medium-term organic revenue annualized
growth outlook to 13-16% (from 8-11% previously). The acquisition
of Verafin is also expected to accelerate Market Technology’s
projected timing of meeting the “rule of 40” 5 threshold to 2023,
two years ahead of Market Technology’s 2025 target.
Financing and Approvals
Nasdaq intends to finance the transaction with a
combination of US$2.5 billion of debt and cash on hand and expects
debt / non-GAAP EBITDA leverage to be approximately 3.9x pro forma
for the transaction. Nasdaq intends to pursue its existing capital
deployment plan, including dividend payments and share repurchases,
consistent with past practice, and expects to de-lever over time to
return to a leverage ratio consistent with its current investment
grade ratings.
The transaction is subject to regulatory approvals
and other customary closing conditions. Spectrum Equity, a leading
growth equity investor based in Boston and San Francisco, and
Information Venture Partners, a leading FinTech-focused venture
capital firm based in Toronto, both significant investors in
Verafin, have agreed to sell their stake as part of this
transaction. It is expected to close in the first quarter of
2021.
Advisors
Evercore served as lead financial advisor to
Nasdaq, along with J.P. Morgan Securities LLC. Nasdaq also received
financial advice from BofA Securities, Goldman Sachs & Co. LLC,
Morgan Stanley and TD Securities. Wachtell, Lipton, Rosen &
Katz and Blake, Cassels & Graydon LLP served as legal advisors
to Nasdaq.
William Blair & Company acted as financial
advisor to Verafin in connection with the transaction. Osler,
Hoskin & Harcourt LLP acted as Verafin’s legal advisor.
Conference Call / Webcast
On Thursday, November 19, 2020 at 8:00 a.m. ET,
Nasdaq will host a webcast presentation to discuss the transaction.
Links to the webcast and accompanying documents will be available
at the company’s Investor Relations website,
http://ir.nasdaq.com/investor-relations.
______________1 ARR for a given period is the
annualized revenue of active contracts. ARR does not have any
standardized definition and is therefore unlikely to be comparable
to similarly titled measures presented by other companies. ARR
should be viewed independently of revenue and deferred revenue and
is not intended to be combined with or to replace either of those
items. ARR is not a forecast and the active contracts at the end of
a reporting period used in calculating ARR may or may not be
extended or renewed by customers.2 Represents revenues less
transaction-based expenses.3 Refer to the non-GAAP information
section of this release for a discussion of this and other non-GAAP
measures.4 Excludes the impact of purchase accounting write-down on
deferred revenue. 5 Represents non-GAAP EBITDA margin
percentage plus annual growth rate.
About Nasdaq
Nasdaq (Nasdaq: NDAQ) is a global technology
company serving the capital markets and other industries. Our
diverse offering of data, analytics, software and services enables
clients to optimize and execute their business vision with
confidence. To learn more about the company, technology solutions
and career opportunities, visit us on LinkedIn, on Twitter @Nasdaq,
or at www.nasdaq.com.
About Verafin
Verafin is the industry leader in enterprise
Financial Crime Management solutions, providing a cloud-based,
secure software platform for Fraud Detection and Management,
BSA/AML Compliance and Management, High-Risk Customer Management
and Information Sharing. Over 2,000 banks and credit unions use
Verafin to effectively fight financial crime and comply with
regulations. Leveraging its unique big data intelligence, visual
storytelling and collaborative investigation capabilities, Verafin
significantly reduces false positive alerts, delivers context-rich
insights and streamlines the daunting BSA/AML compliance processes
that financial institutions face today. Verafin is the exclusive
provider for Texas Bankers Association, Western Bankers
Association, Florida Bankers Association, Massachusetts Bankers
Association, and CUNA Strategic Services, with industry
endorsements in 48 U.S. states. Visit www.verafin.com,
email info@verafin.com or call 866.781.8433.
Contacts
Nasdaq Investor
Contact
Ed Ditmire, CFA: +1 212 401
8737ed.ditmire@nasdaq.com
Nasdaq Media
Contacts
Ryan Wells: +1 646 648 3887
ryan.wells@nasdaq.com
Yan-yan Tong: +46 (0)73 449 66
83yan-yan.tong@nasdaq.com
Longview Communications & Public Affairs
(Canada)Ian Hamilton: +1 905 399 6591ihamilton@longviewcomms.caAndy
Lloyd: +1 416 402 5029alloyd@longviewcomms.ca
Verafin Media
Contact
Brian Hartlen: +1 709 725
8235brian.hartlen@verafin.com
-NDAQF-
Forward-Looking Statements
This communication contains forward-looking
information related to Nasdaq, Verafin and the proposed acquisition
of Verafin by Nasdaq that involves substantial risks, uncertainties
and assumptions that could cause actual results to differ
materially from those expressed or implied by such statements. When
used in this communication, words such as "intends", "plans",
"will", “believes”, "expected”, “projected” and similar expressions
and any other statements that are not historical facts are intended
to identify forward-looking statements. Forward-looking
statements in this communication include, among other things,
statements about the potential benefits of the proposed
transaction, Nasdaq’s plans, objectives, expectations and
intentions, the financial condition, results of operations and
business of Nasdaq or Verafin, and the anticipated timing of
closing of the proposed transaction. Risks and uncertainties
include, among other things, risks related to the ability of Nasdaq
to consummate the proposed transaction on a timely basis or at all;
Nasdaq’s ability to secure regulatory approvals on the terms
expected, in a timely manner or at all; Nasdaq’s ability to
successfully integrate Verafin’s operations; Nasdaq’s ability to
implement its plans, forecasts and other expectations with respect
to Verafin’s business after the completion of the transaction and
realize expected synergies; the ability to realize the anticipated
benefits of the proposed transaction, including the possibility
that the expected benefits from the proposed transaction will not
be realized or will not be realized within the expected time
period; the impact of Verafin’s business model on Nasdaq’s ability
to forecast revenue results; disruption from the transaction making
it more difficult to maintain business and operational
relationships; risks related to diverting management's attention
from Nasdaq’s ongoing business operations; the negative effects of
the announcement or the consummation of the proposed transaction on
the market price of Nasdaq’s common stock or on Nasdaq’s operating
results; significant transaction costs; unknown liabilities; the
risk of litigation or regulatory actions related to the proposed
transaction; future levels of Nasdaq’s indebtedness, including
additional indebtedness that may be incurred in connection with the
proposed transaction; and the effect of the announcement or
pendency of the transaction on Verafin’s business relationships,
operating results, and business generally.
Further information on these and other risk and
uncertainties relating to Nasdaq can be found in its reports filed
on Forms 10-K, 10-Q and 8-K and in other filings Nasdaq makes with
the SEC from time to time and available at www.sec.gov. These
documents are also available under the Investor Relations section
of Nasdaq 's website at http://ir.nasdaq.com/investor-relations.
The forward-looking statements included in this communication are
made only as of the date hereof. Nasdaq and Verafin disclaim any
obligation to update these forward-looking statements, except as
required by law.
Non-GAAP Information
This press release includes certain non-GAAP
financial measures, including organic revenue growth, non-GAAP
EBITDA and ROIC.
Nasdaq and Verafin believe that these non-GAAP
measures provide useful information to management and investors
regarding certain financial and business trends relating to
Verafin’s financial condition and results of operations. Nasdaq’s
and Verafin’s managements use certain of these non-GAAP measures to
compare Nasdaq’s and Verafin’s performance to that of prior periods
for trend analyses and for budgeting and planning purposes. Nasdaq
and Verafin believe presentation of these measures provides
investors with greater transparency and supplemental data relating
to financial condition and results of operations.
Nasdaq’s organic growth calculation methodology
normally excludes acquired businesses from the measure until they
have been part of Nasdaq for a full 12-month period. For purposes
of providing the pro-forma impact of the Verafin acquisition,
Verafin’s forecasted results are included and the impact of
purchase accounting write-down on deferred revenue is excluded in
these measures.
These measures are not in accordance with, or an
alternative to, U.S. GAAP, and may be different from non-GAAP
measures used by other companies. In addition, other companies,
including companies in our industry, may calculate such measures
differently, which reduces its usefulness as a comparative measure.
Investors should not rely on any single financial measure when
evaluating these businesses. This information should be considered
as supplemental in nature and is not meant as a substitute for
operating results in accordance with U.S. GAAP.
A reconciliation of non-GAAP forward looking
information to their corresponding GAAP measures cannot be provided
without unreasonable efforts due to the inherent difficulty in
quantifying certain amounts due to a variety of factors, including
the unpredictability in the movement in foreign currency rates,
Nasdaq’s effective tax rate as well as future charges or reversals
outside of the normal course of business.
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