Nasdaq, Inc. (NASDAQ:NDAQ) today announced that it has entered into a definitive agreement to acquire Verafin for $2.75 billion in cash. 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.
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 has made a raft of commitments, including that Verafin’s headquarters will remain in St. John’s and its executive leadership team will remain in place and continue to lead the company’s growth. Furthermore, Nasdaq 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.
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.
Nasdaq intends to finance the transaction with a combination of $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.