NASDAQ Acquires BWise – Capital Markets GRC Heating Up

Yesterday, the NASDAQ OMX Group announced that it had agreed to acquire BWise, arguably one of the global leaders in the enterprise governance, risk management and compliance (GRC) software sector. Built on a foundation of business process management expertise, BWise’s GRC software platform enables management and business users to easily and efficiently monitor and manage risks and comply with regulations such as Sarbanes-Oxley, Basel II and III, Dodd-Frank, ISO-standards and many more.

Following the acquisition, BWise will join Nasdaq’s Corporate Solutions business unit. The Corporate Solutions business offers a wide variety of customer support services, products and programs to customers including NASDAQ listed companies. Among the governance solutions offered through this unit are web-enabled collaboration and workflow tools for today’s Board members (Directors Desk); educational and training programs; whistleblower hotline; XBRL filing services, and CRD Analytics, a proprietary business analytics and decision support tool that analyzes, benchmarks and rates public companies based on financial, environmental, social and governance performance.

This appears to be a win-win transaction. Nasdaq has demonstrated success selling strategic solutions at the Board level. The BWise GRC Platform adds another winning solution that it can push through that pipe, decreasing its reliance on trading revenues, albeit slowly. Corporate Solutions represent less than 5% of Nasdaq’s net revenues today. For BWise, being part of the Nasdaq family which boasts more than 2,680 listed companies should go a long way in fulfilling its stated goals of expanding its geographic footprint and industry coverage into retail, life sciences, telecommunications and high tech.

Although terms of the transaction are not disclosed, given BWise’s market leading position, the growing awareness and demand for GRC solutions, and the amount of capital sitting on the sidelines with strategic and financial buyers -not to mention the IPO option – we are forced to believe Nasdaq paid a full multiple (if not higher) reminiscent of earlier GRC platform deals, such as EMC/Archer, IBM/OpenPages and SAI Global/Compliance 360, which all went off at mid single digit revenue multiples.

This transaction comes on the heels of Fidelity National Information Services (FIS) announcement last week that it had entered into agreements to acquire not one, but two GRC companies. As we have been reporting, we expect compliance to be the next wave of capital markets activity in the technology and services sectors. That wave seems to be building.