Nasdaq buying N.L. online security company Verafin in $2.75B US deal

St. John's online security and anti-fraud company Verafin will be sold to global technology giant Nasdaq for $2.75 billion US, the companies announced Thursday, making for a "very exciting day" for the founders of the company.

In a statement, Nasdaq said the agreement between the two companies will combine Verafin's products with Nasdaq's international reach to make them a global leader "in the fight against financial crime."

Verafin, founded in 2003 by Brendan Brothers, Jamie King and Raymond Pretty, works with almost 3,000 banks and credit unions in Canada and the United States to detect activity like fraud and money laundering.

The deal will see Verafin's technology made available to Nasdaq's global network of nearly 250 banks, exchanges, investing companies and regulatory authorities that rely on Nasdaq's technology to detect market manipulation and abuse, the release said.

"The intelligent technology solutions Verafin has created are second to none, and that is evident in the company's extraordinary growth and stellar client retention," Adena Friedman, president and CEO of Nasdaq, said in a news release.

Staying in St. John's

The deal promised to boost the province's burgeoning tech sector.

"We are committed to supporting innovation and growth in St. John's and Newfoundland and Labrador. We believe that Verafin will not only complement and grow our existing presence in Canada, but also represents a potential catalyst for further investment opportunities in the province and the country," Friedman said in the release.

It's a very, very exciting day. Obviously not only for Verafin, but I think for the province of Newfoundland and Labrador.- Brendan Brothers, co-founder of Verafin

During an investors call Thursday morning, Friedman said an estimated $2 trillion a year is laundered.

"Financial crime, including money laundering, is among the biggest and most difficult challenges that banks face around the world."

Friedman said an estimated $42 billion is invested in the anti-financial crime space — $12.5 billion of that on technology, with that number expected to grow yearly.

With a market penetration rate between Verafin and Nasdaq estimated at just three per cent, Friedman said there is "an incredible amount of opportunity" for the venture.

Verafin's current clients are all based in North America, Friedman said, while about two-thirds of Nasdaq's revenue in the surveillance business comes from larger clients outside the U.S.

The deal will mean Nasdaq's investment in Verafin will bring their product to larger-tiered banks and financial clients on an international scale.

"We have a really great opportunity to take them into our bank clients across Europe," Friedman said.

Verafin's headquarters will remain in St. John's, Nasdaq said, and the company's executive leadership team will remain in place.

That's an important guarantee for Brothers, who said the deal will mean a big expansion for the technology sector in St. John's.

"It's a very, very exciting day, obviously, not only for Verafin, but I think for the province of Newfoundland and Labrador," Brothers said.

"I think the story out of this is the prosperity it's gonna bring to the province.… The commitments that Nasdaq has made to grow the business, to hire, to increase employment I think is tremendously exciting for us."

Nasdaq also said it will invest in a new $1-million US research and development partnership project with the Genesis Centre, an innovation hub based at Memorial University in St. John's that provides support for startups in the province.

It will also grow a scholarship program at Memorial University, including funding and supervising six fellowships for master's and PhD students "to foster the next generation of talent in the province and help support Verafin's growing employment base."

Brothers said Verafin employs about 600 people, mostly in St. John's but some in Toronto and other offices in North America.

He said Nasdaq has committed to hiring another roughly 180 people next year as part of the company's expansion into a wider market.

"Our goal, since the very early days of our business, has been to create the world's most effective crime-fighting network, and we've been on that path now for the last nearly 18 years, and I think this really allows us to accelerate that vision," Brothers said.

"The connections that they're going to be able to bring our business, the banks, the financial institutions, the markets that they work in globally, is tremendously exciting for us on that path to growth."

The sale is still subject to regulatory approvals and other customary closing conditions, and is expected to close in early 2021. Verafin is expected to deliver at least $140 million in revenue to Nasdaq in 2021.

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