The acquisition is intended to help clients streamline their front-to-back technology stacks and widen Broadridge’s global reach.
Post-trade provider Broadridge Financial Solutions will be able to offer front-to-back-office systems and networking via its acquisition of vendor Itiviti Holding AB for approximately $2.5 billion from Nordic Capital.
The all-cash transaction is valued at €2.143 billion and will add trading and connectivity technology offerings to the list of systems that Broadridge offers, officials say.
The timing of the acquisition reflects where financial services firms are heading, Vijay Mayadas, the president of Capital Markets at Broadridge, tells FTF News.
“Banks are increasingly looking for simplification in their front-to-back workflows, consolidating their trading and post-trade systems around a common data architecture,” Mayadas says. “Broadridge’s presence in post-trade combined with Itiviti’s footprint in the front office, creates a very powerful combination that can meaningfully help broker-dealers drive efficiencies and grow revenue.”
But does this acquisition risk muddling Broadridge’s post-trade message and legacy?
Vijay Mayadas
“Not at all,” Mayadas says. “We launched LTX, a corporate bond trading platform last year and dealers appreciate that we can build unique front-office solutions driven by our post-trade platforms. This positions Broadridge as a ‘one stop shop’, front to back across the trade lifecycle.”
In addition, the acquisition will not impede previous relationships Broadridge has had with third-party, front-office trade order and execution management systems providers, Mayadas says. “Not at all. Our clients drive the decision around what front-office and post-trade platform we use, and we are able to integrate to all vendors,” he says.
The acquisition signals a new chapter for Itiviti, based in Stockholm, Sweden, and owned by Nordic Capital.
“We are immensely proud of the Itiviti team and it’s now time for them to take the next step with Broadridge,” says Fredrik Näslund, partner at Nordic Capital Advisers, in a prepared statement. Itiviti has offices in 16 countries, and “serves 24 of the top 25 global investment banks and over 2,000 leading brokers, trading firms and asset managers across 50 countries,” officials say.
Itiviti makes front-office trade order and execution management systems, FIX connectivity and network offerings, which make it “highly complementary” to Broadridge’s post-trade product suite and capital markets capabilities, Broadridge officials say.
Ultimately, the combination is expected to help clients optimize “balance sheet utilization across equities, fixed income, exchange-traded derivatives, and other asset classes,” according to Broadridge.
The Itiviti acquisition will also help Broadridge expand its efforts in the Asia-Pacific and EMEA regions “as it will significantly expand Broadridge’s revenues outside of North America and enhance Broadridge’s international footprint in key markets,” according to Broadridge, which hopes that the Itiviti client base will be open to “significant cross-sell opportunities across Broadridge’s product portfolio, further enhancing its long-term growth.”
“The acquisition of Itiviti enhances Broadridge’s position as a global Fintech leader,” says Tim Gokey, Broadridge’s CEO, in a prepared statement. “Itiviti significantly strengthens our capital markets franchise and better enables Broadridge to help financial institutions adapt to a rapidly evolving marketplace.”
Broadridge officials say they expect the acquisition “to deliver value to our shareholders in the form of stronger recurring revenue growth, higher margins and higher Adjusted EPS [earnings per share]. This incremental revenue and earnings growth positions us well to deliver at the higher end of our three-year growth objectives for recurring revenue and Adjusted EPS growth,” Gokey adds.
Itiviti generated recurring revenues of approximately €210 million ($246.1 million) in calendar year 2020, officials say.
“Upon closing, Itiviti will become part of Broadridge’s Global Technology and Operations segment and its senior management team, led by [Itiviti] CEO Rob Mackay, will remain with the company to drive future growth,” according to Broadridge officials.
Officials add that the acquisition is subject to customary closing conditions and regulatory approval. The acquisition is expected to close during the fourth quarter of fiscal year 2021.
Houlihan Lokey Inc. and J.P. Morgan Securities LLC acted as financial advisors to Broadridge on this transaction, Broadridge officials say.
Squire Patton Boggs, Roschier Advokatbyrå, and Covington & Burling provided legal advice to Broadridge on the acquisition, and Cahill Gordon & Reindel LLP provided legal advice to Broadridge on the financing transaction.
Credit Suisse and Morgan Stanley acted as joint financial advisors to Nordic Capital for the acquisition.
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