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NYSE Euronext Signs $200 Million Deal for Wombat

  • January 14, 2008
  • Alexa Jaworski

NYSE Euronext has agreed to buy Wombat Financial Software, a privately held provider of data management technology, for $200 million in cash, the companies announced today. The deal, expected to close early next quarter, includes Merrill Lynch & Co.’s minority stake in the company.

NYSE said that the transaction, which is expected to be accretive in 2009, will broaden its “offering of comprehensive market-agnostic connectivity, transaction and data management solutions to customers globally by integrating Wombat’s market data enterprise software and services with” the TransactTools connectivity and messaging business that the New York Stock Exchange acquired early last year.

“Consistent with our goal of providing the best-of-breed technology products for electronic trading, we have now added the market-leading platform for high-performance data management and distribution,” said head of global technology Larry Leibowitz, who added that the combination of New York-based Wombat’s data platform and TransactTools’ infrastructure will allow NYSE to provide customers with a “very efficient end-to-end solution to access markets globally.”

Wombat has “grown tremendously over the last three or four years, and it was clear that there was an opportunity to get our core technologies in front of a much broader set of customers,” said Wombat chief executive Danny Moore in an interview. “Customers were feeling a lot of pressure around things like total cost of ownership in light of exponentially increasing data volumes. We were looking for strategies that would allow us to deliver bigger solutions but in doing so bring down the total cost of ownership.”

Wombat, which was founded in 1997, has 140 employees and offices in Incline Village, Nev., Chicago, London, Belfast and Tokyo. The company says it has more than 100 global customers, including the world’s 12 largest financial firms. It had $28 million in revenues last year, up 124 percent from 2006.

Moore emphasized that Wombat will remain “intact and highly productive” and “will continue to be a very aggressive technology company.” Moore said that he will remain CEO of Wombat for the time being, but his final position in the organization has yet to be determined.

The acquisition of Wombat solves, “in one fell swoop,” a number of issues for NYSE, according to Brad Bailey, senior analyst at Boston-based research firm Aite Group. “NYSE Euronext, like everyone, has been struggling with the messaging rates since their move to the hybrid model last year,” said Bailey. “There are a lot of things within the infrastructure of their technology that Wombat can immediately help. … This is going to get them up to speed in areas they need to get up to speed in very quickly.”

With Wombat, NYSE “can really look at building a powerhouse in the technology solutions for exchanges” business that can compete with the pending combination of Nasdaq and Stockholm-based technology provider OMX Group, observed Bailey.

NYSE Euronext chief executive Duncan Niederauer called Wombat a “technology innovator and world leader in market data management solutions,” adding that he welcomes the “company’s entrepreneurial management team and employees.” Added Niederauer, “Wombat bridges our commercial technology and market data strategies, broadening our customer reach and enabling NYSE Euronext to deliver advanced technology solutions to our customers’ increasing data management challenges.”

Such solutions will be delivered as enterprise software and as managed services on the NYSE TransactTools Secure Financial Transaction Infrastructure network, according to NYSE, including hosted collocation for high-speed trading, direct-market access connectivity and algorithmic execution, and new data products such as integrated and consolidated price feeds.

Ron Jordan, NYSE Euronext EVP of market data, said that one of the biggest concerns of its customers is “not necessarily the data they are getting, but the escalating cost of handling that information and handling it with low latency so they can turn around and really use it effectively.” He added, “Wombat was clearly the leader in … handling large volume message traffic with low latency, so we thought it would be a perfect fit.”

DLA Piper and San Francisco-based FT Partners, an investment banking firm focused exclusively on providing advisory services to the financial services and technology sector, represented Wombat in the sale; Citigroup’s banking and markets division advised NYSE Euronext. FT Partners’ recent transactions in the sector include TradingScreen’s $100 million minority recapitalization, Automated Trading Desk’s $680 million sale to Citigroup and LatentZero’s $125 million deal with Fidessa Group.

Wombat last month released a product, Wombat Data Fabric, that employs a shared memory software architecture that the company describes as a cost-effective alternative to hardware-based solutions to improving messaging speeds.

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