Canada’s TMX to acquire global indices and ETF provider VettaFi in bid to expand globally

Rick Steves

“From a strategic standpoint, this acquisition accelerates TMX’s long-term global expansion, and increases the proportion of revenue derived from our Global Solutions, Insights and Analytics division, and from recurring sources.”

TMX Group Limited, a leading Canadian financial services company, has announced a significant expansion in its capabilities by agreeing to acquire the remaining approximately 78% of the common units of VettaFi Holdings LLC for US$848 million.

This acquisition, which brings the total investment for full ownership to US$1.03 billion, is set to enhance TMX Group’s data-driven analytics and indexing solutions, catering to a global client base of issuers and advisors.

VettaFi, known for its comprehensive suite of global indices and robust ETF services, including trends, analytics, and a global ETF database, also offers digital distribution solutions.

These services will now be part of TMX Group’s offerings, enhancing its global reach and capabilities. McKenzie and Jay Rajarathinam, TMX Group’s Chief Operating Officer, currently sit on the VettaFi Board of Directors.

VettaFi deal is part of TMX’s long-term global expansion

John McKenzie, the Chief Executive Officer of TMX Group, highlighted that this move aligns with TMX Group’s long-term global expansion strategy and increases the proportion of revenue derived from recurring sources and the Global Solutions, Insights, and Analytics division.

“The acquisition of VettaFi will add a dynamic new component to our growing information business, with an exciting set of capabilities and a visionary, innovative team committed to client success. The experience of working together this year has confirmed that TMX and VettaFi are a powerful combination and a tremendous culture fit. Moving forward, the addition of VettaFi increases the depth and value of data-driven insights we provide to clients, expands our digital expertise, and enriches our industry-leading support for ETF issuers. From a strategic standpoint, this acquisition accelerates TMX’s long-term global expansion, and increases the proportion of revenue derived from our Global Solutions, Insights and Analytics division, and from recurring sources.”

“Early on in our relationship with TMX Group it became clear that not only did we have complementary products and solutions, but our companies also have complementary cultures rooted in like-minded values and ambitious vision,” said Leland Clemons, Chief Executive Officer, VettaFi. “Both companies place a premium on putting the client first and moving opportunity into action. I am excited for VettaFi’s clients, partners and employees as we begin this next chapter. Together, we will make markets and each other better.”

“Today marks an exciting chapter in VettaFi’s transformation and is a testament to the leadership team’s client focus and commitment to relentless innovation,” said Andrew Feller, Managing Partner of Aretex Capital Partners. “We have enjoyed working side-by-side with the team to recruit top financial services and technology talent to better serve the asset management community and its broader ecosystem.”

VettaFi will be included in TMX’s Global Solutions, Insights & Analytics

The financial details of the transaction include:

  • Over 80% recurring revenues through the LTM as of September 30, 2023.
  • An implied total valuation net of expected tax benefit of 15.4x 2024E adjusted EBITDA.
  • The transaction is expected to be accretive to adjusted earnings per share in the first year, excluding synergies.
  • The acquisition will be financed through committed bank debt, with plans to return to the target leverage range within two years post-close.
  • VettaFi will be included in TMX’s Global Solutions, Insights & Analytics segment.

The transaction is expected to be completed in January 2024, subject to customary closing conditions. This strategic acquisition marks a pivotal step in TMX Group’s journey towards becoming a more globally integrated financial services provider, enhancing its product offerings and reinforcing its position in the competitive financial market.

TMX invested in SigmaLogic’s ETFLogic

In 2022, TMX Group acquired a minority interest in SigmaLogic, a U.S.-based fintech company and leading provider of analytics and portfolio tools to the wealth management industry and investment fund manufacturers.

SigmaLogic is the firm behind the ETFLogic brand name, which has been collaborating with TMX’s information services division Datalix. The partnership led to the launch of TMX LOGICLY in January 2021.

LOGICLY is ETFLogic’s flagship product and integrates multi-asset research including ETFs, mutual funds, and stocks, AI-powered portfolio analysis, optimization, and trading analytics into a web-based portfolio management trading platform.

The solution helps wealth advisors to better screen and compare products for their clients, analyze a fund’s risk and exposure, ESG factors, liquidity, income, and returns, based on its component stocks, and satisfy client compliance requirements.

“Our home address is Canada and our addressable market is the world”

In 2021, TMX Group listed the world’s first options on a bitcoin ETF. Earlier this year, FinanceFeeds spoke with Luc Fortin, Global Head of Trading of TMX Group, where he explained that there are three major initiatives underway: cloud management, post-trade, and repo for money market clients.

“We’re really innovating in post-trade and making it no longer just a byproduct of trading, He further explained TMX Group’s journey of attracting global capital to Canada, with increasingly global operations and the adoption of 23-hour derivatives trading. “Our home address is Canada and our addressable market is the world.”

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