Until recently, nobody became enthusiastic about enterprise software from capital markets. So how is it his glasses collected and suddenly became the sector that everyone wants to take to the Prom?
The Cinderella Story is Trading Technologies (TT), whose owners have recently sold a controlling interest to Thoma Bravo (with 7ridge who still holds a piece) in a deal with a value of just over $ 1 billion.
So why did some of the largest private equity companies come to court a company in a sector that had written off most of them as old? I have some perspective because, as a former president of TT, I started to get more than a few phone calls during the trial.
One thing is certain: PE-Sponsors do not write any checks of billion dollars, unless they are convinced that they can do their money 3 times to 4x within four to six years.
So at first glance there is a great separation, because everyone “knows” that this is an ultra-adult vertical, seen:
- Every capital market on the planet already has an E/OMS vendor – hence no new customers;
- Price only increases the average a few figures per year; And
- Organic growth in traditional asset classes that are traded via central limit order books is modest.
And yet TT was in the middle of a hot auction.
The answer is simple: more mergers and acquisitions. There is no path to triple the size of the company as a TT without transforming dealing, and insiders in the industry must prepare for a whole new wave to follow, from this fall to 2026.
What happened?
What explains this large increase in terms of attention?
Firstly, the old serial acquirer of the Industrie-ion Markets-Onlangs have put his toe and possibly have to take a step back. From 2014 to 2024, Ion made more than a dozen important acquisitions, including Wall Street Systems (2014), Fidessa (2018), Acuris (2019) and Dash Financial Technologies (2021), often paying premium multiples. But as a roll-up fed by leverage, Ion was recently rejected when it tried to raise € 600 million in preferred equipment and to open the playing field somewhat to potential acquisitive rivals.
Secondly, the software providers of the sitting capital markets both (a) feel the weight of great profit growth and (b) on large war boxes ready to be deployed.
The strategy is solid – BlackRock ($ 174 billion market capitalization) with Aladdin, State Street ($ 31 billion) with Charles River, Nasdaq ($ 33 billion) with Calypso and Adenza – and more importantly their shares act on or near record multiples and available. In the meantime, the private equity sector has stored more than $ 2 trillion, so that they can almost buy what they want.
Thirdly, competing tensions are rising between what I would call the strategic “farmers” versus the sponsor -supported “ranchers”, driven by their various strengths and needs.
The strategic farmers are armed with huge brands, global distribution and “department store” product width for shopping One-stop. All too often they are weighed by slow innovation, low risk tolerance and underwent capital investments.
The farmers supported by sponsor, on the other hand, often excel in disturbing innovation and taking the risk, together with the willingness to quickly use capital to take market share. But although they usually benefit from a great product depth, they are too often boutiques in terms of the width of their offer.
What both parties have in common is (a) towering growth meter expectations, and (b) the need to quickly add new assets and capacities to find that growth given the currently somewhat lukewarm organic growth views.
Look forward
What happens afterwards?
At a high level, consolidation to date means that the field of real goals is not as great as it once was. SS & C, for example, bought Eze in 2018, Deutsche Borse Brak Simcorp in 2023 and Nasdaq acquired both Calypso and Adenza in 2023.
That said, the market probably sees two flavors deal in the months and quarters ahead.
Firstly, the large ticket platform game that matches the current offers plays, essentially “buy growth” and pressing costs. TS Imagine represents the poster child for this category, so that E/OMS, Portfolio and Risk Management are brought to the table in addition to the substantial income. Other names in this category are Flextrade (Multi-ASCHET E/OMS, although not acquisitions that have been oriented so far) and SmartStream (reconciliation and post-trade, with an owner who reportedly investigated an exit in 2022).
Secondly, Bolt-on fast-growing games for bringing the following generation of trade models and/or fast-growing asset classes in the mix.
One probably path would be new with a fixed income model Tech Plays that go beyond the adult RFQ/RFS models that were previously developed by Tradeweb and Marketaxess. This includes smaller companies such as Ediphy, Adroit and Openyield.
Another promising road would be fast-growing digital asset infrastructure, where new legislation from the congress, large victories on the institutional side (eg Black rock with IBIT), accelerating adoption on the e-retail side (e.g. Fidelity) and the marked potential of this cashiering all of this Early of this Early of tokenization Class.
Like a Vivian Ward in Beautiful woman With a no-limit credit card, the software sector of the capital markets is about to become a lot more interesting.
About the author
Michael Krains is CFO of Solidus Labs and former president of trade technologies. He previously worked as an investment banker at Sandler O’Neill and Wasserstein Perella and as a business lawyer at Kirkland & Ellis.
The pronounced views belong to him and do not represent those of Solidus Labs.
