Axioma, a RegTech 100 company, is set to be acquired by German stock exchange operator Deutsche Börse in a $850m deal that sees General Atlantic become a minority investor.
General Atlantic has made a $715m minority investment in the portfolio and risk management software business. As a part of the deal, the private equity house has entered in a strategic partnership with Deutsche Börse and its investment will be used to finance the acquisition.
The deal is expected to close in the third quarter of 2019, following regulatory approval.
Founded in 1998, Axioma is a provider of enterprise risk management, portfolio construction, and risk and regulatory reporting solutions and APIs. It develops and markets innovative risk analysis, portfolio rebalancing and performance attribution products for the global financial services industry. This helps leading financial firms manage risk, increase returns and improve operational efficiency.
Axioma’s typical clients include asset managers, hedge funds, insurance companies, pension funds, wealth managers and investment banks among others. Axioma reported around $100m in annual contract value revenue in 2018, which has grown by 23 per cent CAGR since 2010.
The company will be combined with Deutsche Börse’s index businesses which is valued at €2.6bn. The stock exchange operator will incorporates Axioma’s solutions to offer a broad suite of index and analytics products to global markets.
Depending on the roll-over, Deutsche Börse is expected to own around 78 per cent of the new company, while General Atlantic will hold around 19 per cent.
A number of the Axioma management team will reinvest around $105m alongside General Atlantic and will maintain a stake of about 3 per cent.
General Atlantic managing director and head of EMEA Gabriel Caillaux said, “We have closely followed the development of Deutsche Börse’s index assets for many years as we witness the global shift to passive products and the rise of indexed investing strategies.
“We are excited to be partnering with such a renowned firm. We are also highly impressed with Axioma’s track record and believe this combination provides a strong foundation for future growth.
“After our detailed analysis, we are confident that the combination will generate significant value creation and strong investor returns.”
In an interview with RegTech Analyst last year, Axioma managing director and head of risk solutions Ian Lumb said the wave of new regulations being deployed is being seen as “just layers of costs on top of the business” by some compliance leaders.
Last year, Axioma was hand-selected for the RegTech 100, by a panel of industry experts. The list compiles all the RegTech companies every financial institution should know about in 2019.
The start-up was recently chosen by Legal & General Investment Management to support its risk analytic capabilities.
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