Deutsche Börse has agreed to acquire Axioma, a provider of enterprise risk management, portfolio management, and regulatory reporting solutions, for $850m.

Deutsche Börse AG - Bildpool Börse Frankfurt - Parkett

Image: Deutsche Börse to combine Axioma with STOXX and DAX. Photo: courtesy of Deutsche Börse Group.

Post-acquisition, Axioma will be combined with STOXX and DAX, the index businesses of Deutsche Börse, which are valued at €2.6bn ($2.93bn). The transaction includes assumption of Axioma’s debt of around $30m by the German capital market company.

The combination is expected to result in a fully integrated, buy-side intelligence player that will offer products and analytics to address the increasing demand for an end-to-end platform.

Headquartered in New York, Axioma offers an integrated suite of front-to-back investment management solutions to asset managers, hedge funds, insurance firms, wealth managers, pension funds and investment banks across the world.

Its cloud-based portfolio and risk management solutions, and Deutsche Börse’s index business are said to be highly complementary. The German company believes that the combination will provide a broad set of index and analytics products with global coverage.

The combination will give Axioma’s existing clients closer integration to data from a leading family of indices, which are said to be key components for designing investment strategies. For the index business clients of Deutsche Börse, the transaction will give them access to Axioma’s powerful analytics that enable creation and testing of custom indices.

Deutsche Börse and Axioma have been partners since 2011 and have co-developed products such as factor indices and ETF products.

Axioma founder and CEO Sebastian Ceria said: “The union of Axioma, STOXX and DAX under the Deutsche Börse umbrella creates a growth company that is uniquely equipped to help clients capitalize on the critical trends now reshaping the investment-management landscape.

“The combination of STOXX’s indexing expertise with Axioma’s best-of-breed analytical capabilities in risk management, portfolio construction and performance attribution is expected to result in strong near-term revenue synergies and creation of a platform for future growth.”

In connection with the acquisition, Deutsche Börse has signed a deal with global growth equity investor General Atlantic under which the latter will invest nearly $715m in the new index analytics business. Deutsche Börse is likely to own nearly 78% in the new company, General Atlantic will hold a stake of around 19%, while the remaining stake of around 3% will be held by Axioma’s management.

Deutsche Börse CEO Theodor Weimer said: “This transaction is a step change for our pre-trading business and fully in line with our Roadmap 2020 strategy, which besides organic growth builds on programmatic M&A and new technologies.

“We are also excited about the partnership with General Atlantic and believe it will help to further accelerate growth of the combined business and to achieve strong value creation.”

The deal, which would need approval by the relevant competition authorities and additional customary conditions, is likely to be completed in the third quarter of 2019.