By Diptendu Lahiri and Nikhil Subba
(Reuters) – U.S. exchange operator Nasdaq Inc said on Tuesday it would buy investment analytics provider eVestment Alliance LLC for $705 million to bolster its market technology business and woo more institutional investors.
Evestment, whose clients include Morgan Stanley, Google parent Alphabet Inc and BlackRock Inc, provides cloud-based services to help investors monitor market trends and make investment decisions.
The deal comes amid a wave of acquisitions in the industry as exchange operators seek to boost margins and reduce their reliance on trading amid weak volumes and stiff competition.
About 75 percent of Nasdaq’s revenue comes from non-transaction related businesses, which provide a steadier income flow than trading fees.
Evestment would represent Nasdaq’s second acquisition since Adena Friedman took over as the exchange operator’s chief executive in January.
Friedman, a vocal advocate for investing more in innovative technologies such as cognitive computing, also oversaw Nasdaq’s July purchase of London-based startup, Sybenetix.
Sybenetix uses artificial intelligence to help compliance officers at asset management firms analyze the behavior of their traders in order to prevent market abuse.
Nasdaq also closed several acquisitions last year, including options exchange operator International Securities Exchange.
“Nasdaq has been diversifying from pure trading for a period of time now and it continues that focus (with eVestment),” Richard Repetto, an analyst at Sandler O’Neill & Partners, said.
Apart from its namesake stock exchange, Nasdaq runs a large business that sells market technology to trading firms, exchanges and clearing houses around the world.
Revenue from that business rose 7.5 percent in the second quarter ended June and accounted for nearly 24 percent of overall revenue.
“The investment management community is relying increasingly on independent data and advanced analytics to drive their key business decisions, including asset allocation and investment choices,” Friedman said in a statement.
Nasdaq said it would use debt and cash on hand to buy eVestment and expects the deal to close in the fourth quarter.
The company’s shares were down 1.8 percent at $74.02 in morning trading.
(Reporting by Nikhil Subba and Diptendu Lahiri in Bengaluru; Additional reporting by John McCrank in New York; Writing by Sweta Singh; Editing by Sai Sachin Ravikumar)