Itiviti Holding Ab (BR) Earnings Call Transcript & Summary

Hello, and welcome to the Broadridge update conference call. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to Edings Thibault. Mr. Thibault, please go ahead.

Thank you, Keith. Good morning, and welcome to the call this morning to discuss Broadridge's announced acquisition of Itiviti. A press release and the slides that accompany this call may be found on the Investor Relations section of broadridge.com. Joining me on the call this morning are Tim Gokey, our CEO; and our CFO, Edmund Reese. Before I turn the call over to Tim, a few standard reminders. We will be making forward-looking statements on today's call regarding Broadridge that involve risks. A summary of these risks can be found on the second page of the slides and a more complete description on our annual report on Form 10-K. We will also be referring to several non-GAAP measures, which we believe provide investors with a more complete understanding of Broadridge's underlying operating results. An explanation of these non-GAAP measures and reconciliations to their comparable historical GAAP measures can be found in the presentation. Let me now turn the call over to Tim Gokey. Tim?

Thank you, Edings. And thank you all very much for joining us on short notice for this exciting announcement. As you know, Broadridge has agreed to acquire Itiviti, a leading global capital markets technology provider, in a move that enhances Broadridge's role as a global fintech leader. This morning, I want to share with you why we think Itiviti is such a strong fit for Broadridge and for our capital markets franchise and why it positions us to drive even more value to our clients. Edmund will walk you through how it will drive both long-term value and near-term results for our shareholders. Of course, we'll leave plenty of time for your questions. We're tremendously excited. So let's get started. The headlines are on Slide 2 of the accompanying presentation. Broadridge is acquiring Itiviti for EUR 2.1 billion or approximately $2.5 billion from Nordic Capital. This acquisition enhances Broadridge's position as a global fintech leader, better positions us to help our clients grow and, through them, furthers our mission of enabling better financial lives. I want to draw your attention to 4 key highlights of the transaction. First, Itiviti will strengthen our capital markets franchise by extending our product portfolio into front office, order management and connectivity solutions and enhancing our multi-asset class capabilities. With Itiviti's complementary product portfolio, Broadridge is well positioned to be a leading provider of capital markets technology solutions across the full trade life cycle. Second, Itiviti's global scope accelerates our international growth, giving us critical scale in Asia Pacific and extending our market reach in Continental Europe. That increased scale and scope not only allows us to better serve global financial institutions, it provides a significant cross-sell opportunity for our capital markets and governance franchises. Importantly, we expect this acquisition to drive significant value to shareholders with double-digit returns well above our cost of capital. Looking ahead to our 3-year growth objectives, it will drive incremental revenue and earnings growth that positions us well to deliver at the higher end of our 3-year growth objectives for recurring revenue, margin and adjusted EPS growth. Finally, we remain committed to an investment-grade credit rating. We expect our strong free cash flow to give us flexibility to reduce leverage significantly over the next 2 years while maintaining our historic capital allocation policy. So with that introduction, let me give you a brief overview of the transaction on Slide 3. Most of the details are laid out in our press release, so let me just share a few key points. Itiviti is a $250 million company with high-quality, subscription-like revenues to drive a growing and highly predictable revenue stream. As Edmund will discuss, we expect the deal to deliver a strong double-digit IRR and to be accretive to our organic revenue growth, adjusted operating margins and adjusted EPS. It's an all-cash transaction, and we'll be using our strong investment-grade balance sheet to finance the acquisition using a new term loan facility. The impact will raise our leverage at the time of close, but we expect to be able to return to lower leverage within 2 years. We expect our free strong cash flow will enable us to drive down debt while also continuing to make internal investments, fund our growing dividend in line with our 45% payout ratio track record and invest in tuck-in M&A. Finally, we expect to close the transaction in the fourth quarter. So what is Itiviti? And why do we think it's such a strong fit for Broadridge? Let's turn to Slide 4 for an overview. Itiviti is a leading global provider of order management and trade execution technology and connectivity solutions for financial institutions. With calendar year 2020 revenues of $250 million, it has approximately 1,000 associates and 16 offices around the world. Itiviti has 2 major product lines. The first is front office trading order and execution management systems, or OEMS, for sell-side capital markets firms, which accounts for 60% of revenues. OEMSs enable traders to develop and manage trade execution strategies, monitor market data, securities updates on a single automated platform. It's the core functionality that powers trading. Itiviti's OEMS solutions provide agency traders the state-of-the-art platform that includes sophisticated automation capabilities and workflow functionality. It's used by more than 10,000 active sales traders across 270 financial institutions. Itiviti also provides a principal trading platform designed to address sophisticated trading strategies especially across equities and exchange-traded derivatives. With more than 130 principal trading clients, Itiviti is a leading OEMS solutions provider for exchange-traded derivatives and is a leader in FX trading as well. The remaining 40-or-so percent of Itiviti's business is anchored by its FIX network services, an order routing network that connects more than 1,700 buy- and sell-side institutions. In addition, Itiviti offers a suite of FIX engines and tools to help its clients link their own internal systems. Itiviti is truly a global player with offices in 16 countries around the world. Almost 2/3 of its revenue is generated outside the Americas. That global scale, client base and physical footprint brings real value to Broadridge, as I'll discuss in a moment. Let's turn to Slide 5 to talk about why the complementary strategic fit between Itiviti's front office solutions and Broadridge's post-trade capabilities is so compelling and why we think our combined capital markets business will be so well positioned for the next leg in its growth journey. Itiviti offers Broadridge a compelling opportunity to extend our service offering from our historic focus on post-trade capabilities into the front office. The combination of Itiviti's front office trading solutions with Broadridge's leading post-trade back-office capabilities will allow us to serve our clients' entire trade life cycle from origination to settlement, adding more than $5 billion to Broadridge's total addressable market, bringing our capital markets' TAM to more than $20 billion and Broadridge's TAM to more than $50 billion. Today, at most capital markets institutions, the front and back end exist as 2 separate functions. For Broadridge, the expansion into the front office will enable us to bridge that gap and enable our clients to simplify their front-to-back technology stack and operating model. This is particularly attractive as capital markets firms continue to face the need to mutualize costs. This enables Broadridge to compete for a larger share of wallet and to broaden our critical relationships within clients while addressing key market drivers, such as automation, data and, as I said, cost. The combination also increases our joint capabilities across multiple asset classes, creating significant cross-selling opportunities and enhancing our relationships with blue chip clients. For example, Itiviti is a leading provider of equity trading OEMSs and Broadridge is a leading provider of equity post-trade capabilities. With the equity trade cycle compressing on the back of increasing high-frequency and algo-driven trading, it's increasingly important to serve clients across the traditional boundaries between front, middle and back office. We are now positioned to help our clients simplify their operations and reduce costs. Broadridge is also a leader in fixed income post-trade solutions with 19 of the 24 U.S. primary dealers on our technology platform. With increasing electronification, demand is growing, and we see compelling opportunities from cross-selling Itiviti's capabilities especially in North America. These opportunities should increase further as we launch our innovative LTX platform. And finally, Itiviti is a market-leading provider of OEMSs to principal traders with strong exchange-traded derivatives capabilities. Broadridge's ETD capabilities are at an earlier stage, but our recent R.J. O'Brien win is a great example of how we're extending our capabilities, and Itiviti will accelerate our ability to compete in this important market. With a holistic, modular and multi-asset class front-to-back solution covering the entire trade life cycle, our capital markets franchise is better positioned than ever to solve our clients' needs to simplify operations, reduce costs and meet the demand for shortening trade cycles. Beyond its complementary product suite, Itiviti also brings significant synergies with its global footprint and blue chip client base, as we'll discuss on Slide 6. Itiviti's global reach is highly complementary to Broadridge's international business, significantly expanding our size and extending our reach. The acquisition virtually doubles our business in APAC and extends our reach in Continental Europe and Scandinavia. Growing our global footprint enhances our ability to serve our global clients wherever they operate. Itiviti also brings an impressive blue chip client base. It serves 24 of the top 25 global investment banks, which will help us deepen our relationships and create additional cross-selling opportunities. Beyond those large institutions, Itiviti's base of over 2,000 clients should enable additional long-term cross-selling opportunities across each of our businesses. The combination of a highly complemented product suite, increased global reach and strong client connections should enable us to drive significant value to our clients and, in turn, drive strong revenue synergies. We're targeting approximately $20 million of revenue synergies or just under 10% of 2020 revenues by 2025. Those synergies, coupled with Itiviti's own strong momentum, should sustain strong, high single-digit growth for years to come. Let me conclude by highlighting that today's announcement underscores Broadridge's role as a global fintech leader and is an important step in the continued growth journey for our capital markets franchise and for our company. Enhancing our portfolio of solutions and services through Itiviti's highly complementary product suite delivers on our strategy of enabling our clients to bring innovative new capabilities to market, mutualize solutions and simplify their technology. Before I turn it over to Edmund, I'd like to make a comment to more than -- to the more than 2,000 associates in what will be our combined international and capital markets businesses. To our Broadridge associates, thank you. To our new colleagues, we look forward to welcoming you. For both, this transaction is about growth, and I hope you are as excited as I am about what we can do together to make a difference for our clients and the industry. Let me now turn it over to Edmund to review the positive financial impact we expect in this acquisition in both the near and long term. Edmund?

Thank you, Tim, and good morning. Let me start by highlighting 3 key financial points associated with the acquisition of Itiviti. First, as Tim mentioned, we expect the deal to generate a strong double-digit internal rate of return, well above Broadridge's cost of capital. Second, Itiviti has a strong growth profile that is accretive to Broadridge across recurring revenue, adjusted operating margins and adjusted EPS. Third, Broadridge's strong free cash flow and balance sheet allows us to finance this acquisition while maintaining both an investment-grade credit rating and our capital allocation priorities to fund internal investment, pay the dividend and pursue targeted tuck-in M&A. The acquisition of Itiviti further enhances Broadridge's strong financial profile. Tim has told you about the strategic benefits of extending our product reach into the front office, and I'll now give an overview of the anticipated near-term and long-term financial benefits that this transaction bring. I'll begin on Slide 7, where you see the financial profile of Itiviti and how it squarely meets the return and growth criteria that we target when making an acquisition. First, we expect Itiviti to generate an attractive double-digit internal rate of return that is well above our weighted average cost of capital. As with almost all of our acquisitions, these returns are expected to be driven by the strong underlying growth of the business and additional revenue synergies. The acquisition also improves our financial performance across several important value metrics. Let me touch briefly on each of those metrics, starting with our mix of recurring revenues. Recurring revenues made up 65% of Broadridge's total revenues in fiscal year '20. The addition of Itiviti's high-quality subscription revenues will increase that mix by 200 basis points to 67%. Next, we expect Itiviti to generate strong organic recurring revenue growth. We are targeting $20 million of revenue synergies by 2025, which, on top of Itiviti's strong stand-alone growth rate, should sustain high single-digit 8% to 10% organic growth. That should increase Broadridge's 5% to 7% organic growth trajectory by approximately 20 basis points. And finally, Broadridge's objectives to expand margins through scale and efficiency is strengthened by adding Itiviti. Itiviti's 30% plus operating margin business will increase our adjusted operating income margin by 50 basis points by fiscal '23 and positions us for higher adjusted earnings growth. So double-digit IRR, improved mix, higher growth and higher margins, Itiviti is a high-quality business that's accretive to Broadridge's strong financial profile. Next, let's turn to Slide 8 to see how that strong financial profile increases our confidence that we're well positioned to deliver at the higher end of our 3-year growth objectives. As most of you know, we laid out a set of financial objectives covering the 3-year period from fiscal year 2020 to fiscal year 2023, including recurring revenue growth, operating margins and adjusted EPS growth. And let me touch on each one of those to help you understand the impact that we expect from Itiviti. I'll start at the top with organic recurring revenue growth. We set an objective for a 3-year compound annual growth rate of 5% to 7% organic recurring revenue growth. Itiviti will not be reported in our organic recurring revenue growth until fiscal year '23, and that incremental organic growth will have only a modest impact on our 3-year targets. The more significant impact is on our recurring revenue growth, which includes the impact of M&A. We said at our Investor Day that we expect M&A to drive an incremental 1 to 2 points of growth over the 3-year period, and I'm pleased to say that Itiviti positions us to deliver on that objective and more. We expect Itiviti revenues to contribute 2.5 to 3 points of growth to our 3-year CAGR. As a result, we are well positioned to deliver at the higher end of our 7% to 9% 3-year recurring revenue CAGR objective. Now let's move to AOI margins. Our objective calls for us to raise our adjusted operating income margin by an average annual rate of greater than 50 basis points. By 2023, we expect the addition of Itiviti's higher-margin business will raise our margins by approximately 60 basis points or an average rate of 20 basis points per year. So I think you can see that we're very comfortable in saying that we are well on track to deliver margin expansion of more than 50 basis points per year. And finally, on adjusted EPS. We expect Itiviti to be a strong contributor to our adjusted EPS growth by 2023, contributing 2 points of growth or more than $0.30 in fiscal '23 to our 3-year adjusted EPS CAGR. And with those 2 points of EPS CAGR growth from Itiviti, we believe we are well positioned to deliver at the higher end of our adjusted EPS growth objective. All in all, the summary headline is that the acquisition of Itiviti should put us comfortably on track to achieve our margin objectives and leaves us well positioned to deliver at the higher end of our recurring revenue and adjusted EPS growth objectives. And let me also take a moment to provide you a sense of how Itiviti is likely to impact our fiscal '21 and fiscal '22 results. The impact on fiscal '21 will depend largely on when in the fourth quarter the transaction closes, but we would estimate an incremental point of recurring revenue growth and a modestly dilutive impact on adjusted EPS. For fiscal '22, we expect that Itiviti will add approximately 7 points to recurring revenue growth and be modestly accretive to our adjusted EPS. We'll be able to provide a better view of the impact on fiscal '21 on our third quarter earnings call in early May and on our fiscal '22 on our fourth quarter earnings call. Now before I wrap up, let me comment on our financing strategy. At $2.5 billion and approximately 25x adjusted EBITDA, the purchase price reflects the strength of Itiviti's technology-focused recurring revenue business model and the strong growth prospects we see for our capital markets franchise as well as the impact of low rates. We are funding the deal through a new $2.55 billion term loan facility at very attractive rates, and we expect our leverage ratio at the time of close to approximately be 3.6x. We intend to rapidly pay down debt over the next 24 months to a new target of approximately 2.5x, which reflects our broader scale and scope. With that in mind, we expect to remain investment-grade, and we see no change to our capital allocation priorities. Our strong free cash flow and balance sheet should enable us to reduce debt while funding internal investment, growing a dividend in line with a 45% payout ratio and pursuing additional tuck-in M&A opportunities. And so I'll end where I began and then turn it back over to the operator for your questions. The acquisition of Itiviti makes Broadridge an even stronger company. Our ability to deliver increased value to our capital markets clients with a front-to-back suite of solutions covering the entire trade life cycle makes our business stronger and positions us to be stronger financially with a greater share of recurring revenues, stronger organic growth, higher margins and a strong investment-grade balance sheet. We believe we are well positioned to deliver at the higher end of our 3-year recurring revenue and adjusted EPS growth objectives, and we are well positioned to continue to execute on our capital priorities. So with that, let's take your questions. Operator?

[Operator Instructions] And the first question comes from Peter Heckmann with D.A. Davidson.

Congratulations on a larger-than-expected deal. Wondering if you could talk a little bit more about the current overlap of some of your GTO customers. How many within the Americas might already use NYFIX or another Itiviti solution? And then when talking about those recurring revenues, can you talk about what portion is variable recurring versus fixed? And if there's any sensitivity to trade volumes within the revenue base?

Yes. Let me address the first part of that, and I will turn it over to Edmund for the second part. First of all, we are very excited about the ability for us to help Itiviti grow in North America. And as you know or may know, the NYFIX connectivity solution is a pretty well-penetrated solution. There's a lot of ubiquity of that across North America and globally. And so there'll be a pretty high client overlap with that in terms of who our clients are and who their clients are. Itiviti is much less penetrated in North America than it is in Europe and APAC on the OEMS side. And Pete, given our strong post-trade position and relations with clients, we think it's a great opportunity for us to help them. It's been a strategic growth initiative of theirs to do more in North America. We think we can really help them with that. And similarly, I'd say we have -- when you look at our capital markets growth strategy pre this acquisition, a significant part of that was growth outside of North America as we've talked about, and we think there's a great opportunity in Europe as the regulations there are creating that market to be more integrated and making industry level solutions much more common. And Itiviti's client base and knowledge and scale on the continent and in APAC we think will really help us with the growth plans we already had, but just makes us more confident in them. So we really think that the complementarity of this is strong, a fair bit of overlap on the connectivity side, but lots of white space on the OEMS versus post-trade side, both in North America and outside of North America. I'm going to turn to Edmund to just talk a little bit about the revenue model and variability.

Yes. Thanks for that question, Peter. As I mentioned in my prepared remarks, this is a subscription revenue base. All recurring revenue is really going to increase our percentage of recurring revenues up to 67%. It's predominantly subscription-based pricing. So per seat, the market volatility won't directly impact the revenues in the near term. So we see this as a strong recurring revenue base that is accretive to us and predominantly repeating revenue here.

And just adding to that, Pete. So it's per seat, and so it's not a direct relationship. Clearly, firms scale up and scale down as the market changes. And so there'd be some, I would call it, sort of second order impact, but it's not a direct per trade model the way some of our other DTL businesses are.

And the next question comes from David Togut with Evercore ISI.

Tim and Edmund, I have a few questions. First, just following up on Pete's question. Can you talk a little bit about the subscription model? Is there an average contract length that you see historically? Or are these just evergreens that renew automatically? Second, can you talk about the build to high single-digit organic revenue growth? Is that just the market share gain story? Or is the underlying market growing high single digit? And then third, if you could comment a little bit on the competitive environment, presumably, you looked at competitive assets, and how you landed on Itiviti would be helpful.

Yes, absolutely, Dave. So let me take those. And so first of all, on the subscription model, these contracts are relatively short-term. They're not pure evergreen, but they're generally 1 to 2 years. So they roll over pretty frequently, and that's actually helpful to us in terms of some of the accounting issues. So we like that. On the build to high single digits, it is -- it's a combination of market and share growth. So the market is growing in low single digits and, as I mentioned, is a pretty significantly large market, around $5 billion in total addressable market. And -- but there is a real share opportunity here. So the biggest competitor is internal. There still nearly half the market is internal, and that's a real opportunity. And then on the vended side, there are 2 large legacy competitors and there's a third competitor that has recently exited. And the 2 large competitors really have not been investing in their capabilities. And so Itiviti really has more modern technology than those competitors and has been taking share very nicely. So it's been growing double digits. We've moderated that a little bit for our case here, but we think there's a really nice opportunity to continue to help people with -- where they have internal solutions and really move that to a more mutualized solution as well as to take share from competitors. And I'd just say that our focus on long-term relationships and our commitment to reinvest in our products is fully differentiating relative to the competitors that are currently serving the market. And then the last piece, oh, I did it in the reverse order, but the build to high single digit, yes, it is just what I said, it's partly market, which is low single digits its share. It involves some growth in North America, involves some revenue synergies, and we're just very excited about this.

Got it. Just a quick final question. What's the average interest rate we should model in on the $2.55 billion term loan facility?

I'll let Edmund take that one.

As I said, David, we are pretty attractive rates on this deal right now. I'd say if you look at our current loans out there, term loan facilities at 2.9% and 3.4%. This one is going to be quite a bit better than that, so just above 2% is the interest rates that we see on this one.

And the next question comes from Chris Donat with Piper Sandler.

Tim and Edmund, just wanted to check on the revenue growth that has been seen at Itiviti on the OEMS piece. Is that growing at the same -- like basically, are the 2 businesses growing at sort of the same 8% to 10% rate? Or is one growing faster? I had the impression that network connectivity might be growing slower, but I might be misunderstanding that.

Yes. No, Chris, that is right. Network connectivity is low single digit. It's a pretty stable business. We really like the business. Good -- great set of clients, good relationships. And there's been a little bit of share benefit there, but it's been a slower growth business. The real growth has been on the OEMS side, where because of the level of internal solutions and because of the real interesting competitive situation with a major exit and with 2 other competitors that are viewed as more legacy, has been taking pretty significant share on that side.

Okay. And then just a question on timing, Tim, on the timing of the announcement of this merger. It had been kind of a quiet period for Broadridge in terms of tuck-in acquisitions for the last year or so and you have this one now. Just anything with the history of Itiviti and its private equity owners that created the opportunity now or how did you come to price now? Just trying to understand sort of the background of where we got to this one.

Yes. I think the background is, first of all, we have been quiet the past year, but we haven't -- it's not that we haven't been trying. But we've been -- we just haven't found things at the value that we thought made sense for our shareholders. We have been looking for some time for something in capital markets that would help us with this front-to-back value proposition, and we have been looking at Itiviti on and off and the pieces of Itiviti really for the past few years. And so earlier this -- or late last calendar year, as it became apparent that Nordic was beginning to think about really the next phase for Itiviti, we were able to get into conversations with them, very pleased to be able to do that. And this is something -- we have a whole set of things that we would like to execute on, if possible. And so it's one we've been looking at. And we're really pleased that we're able to make it happen.

And the next question comes from Andrew Bauch with Wolfe Research.

Congratulations on the deal. I know in the past Broadridge has been developing its own solutions that somewhat mirror Itiviti's offerings. I mean how does this marry up with what Broadridge currently had in the works? And maybe from a qualitative perspective, how challenging is the integration here from the technology perspective? I mean, is it -- are you at scale within the first 6 months? Or does it take some time to really integrate?

Yes, Andrew, thank you very much. So first of all, in terms of relative to what's been in the works, we -- as you know, we've been largely a back-office company. The thing that we have been working on we've talked about over the past year or so is what we're doing with LTX, which is our fixed income, AI-driven trading offer that we're very excited about, where we're working with Jim Toffey, the founder of Tradeweb, really to bring AI and a much higher level of electronification to the fixed income market. And as you know, that's something that we've been really excited about in terms of the value opportunity for Broadridge shareholders with that, and that's going to be launching later this year. And so that's really the only point of overlap. We think this is a real plus for that because Itiviti, as a front office company, can help us bring that to market. And similarly, Itiviti has not been as strong in fixed income, and this could be a real way to differentiate their fixed income. Not that it's a newer area for them, this can really help differentiate them. So we think it will bring really interesting value in both directions there. The -- I'd just call your attention also to what we talked about as we go sort of by asset class in terms of where we can help each other. We're both strong in equities. We're very strong in fixed income, it's a newer area for them, so we can help them grow. They're very strong in exchange-traded derivatives, where it's a newer area for us, so they can help us grow. So we really like that in terms of the way we can help each other move forward. And then on the technology integration, there are sort of levels of this. So since we're obviously both significant players today, we're already integrated in some sense with Itiviti and have many clients where those clients use them and use us. And so that level of technology integration is relatively straightforward. I think what -- where the real unique benefit to clients will come will be as we move to a higher level of integration where we are collectively displacing some of the middle office things that are between us and really bringing data from the back office into the front office. And it is -- we've talked a lot about costs, but the real uniqueness of this is when you can bring things like the cost of different venues and the cost of trades in and put that -- expose that to the traders to help them make better decisions. And as you can leverage the back-office data to help the front office make better trading decisions, that is -- the value of that will be very, very differentiating. That will be -- to be clear, that would be a little bit longer. That would be probably 18 months out.

And the next question is from Patrick O'Shaughnessy with Raymond James.

Question on the Itiviti business model. Does their OEMS business have any buy-side client base? Or is that entirely sell-side?

Patrick, it is very largely sell-side. I'm not going to say that there are no buy-side clients, but it's really a sell-side business.

Okay. So when you say in the presentation that they have 500 buy-side clients, that would be the networking connectivity business?

That's right.

Great. And then a question on the valuation of this deal. Obviously, it's around 10x revenue. When we look at your past deals, they've been generally less than 5x revenue. What was it about this business that made you guys willing to stretch a little bit more in valuation?

Yes, absolutely. Let me start on that and then ask Edmund to comment at all -- as well. So this is -- partly, it's a very -- just relative to that revenue, this is a very high-margin business. So we're acquiring this for approximately 25x cash EBITDA. And Patrick, when you look at the growth outlook, the recurring revenue model, the healthy margins and the very low rate environment, all those things come in. We do think we generally look at what we think are the returns that we're going to get, and we're really looking at this as a double-digit IRR, high teens on a levered basis. And it just makes us stronger. So I probably said all the really good things, but I'm -- I see Edmund is laughing because he's saying like, what am I going to add to that. But Edmund, anything you want to add on to that?

Tim, I do think you hit on the key points. And Patrick, I'll just emphasize what Tim just said about the double-digit internal rate of return, far above our cost of capital. So we've continued to have the strict criteria, revenue returns both in the stand-alone business and what we can get from the synergies here, the double-digit IRR, that's what we focused on here. So I think we feel good about the valuation at the 25x cash EBITDA.

And actually, can I just add on a third thing, just as I was listening to Edmund, and just -- I think it's important to emphasize, which is just -- it'd be easy to draw the conclusion that this is something very different for Broadridge. And I want to emphasize that it really meets all the criteria that we have applied to all of our nearly 40 M&A transactions over the past 10 years. It's been very carefully underwritten. There's a lot of discipline in here. It is -- and we said that if we do something this large that we have to have a lot of conviction behind it, and we do have that conviction here. It really hits all the points that we look for. And we really think the returns to our shareholders here are going to be very attractive over time.

And the next question is a follow-up with David Togut of Evercore ISI.

Just a couple of quick follow-ups. The first is, how does the acquisition of Itiviti position you both to retain the E-Trade trade processing business and potentially pick up the internal Morgan Stanley trade processing when you look at the combined needs of that client? And then second, how does this tie into your wealth management franchise in terms of the front office capability that you're offering to UBS and other potential wealth managers who might sign up for that platform?

Yes. Dave, I think this is really -- it really is focused on capital markets. It does not have that much implication relative to E-Trade and Morgan Stanley and relative to what we're doing with UBS. We're just evaluating now if there are any capabilities that are applicable here. There may be on the connectivity side. The functionality around order management for capital markets firms and wealth managers are actually pretty different with wealth managers. There's a lot of rules and checking and things that are embedded around who the client is and whether this is an appropriate transaction for them that is not at all the same on the capital markets side. So we're evaluating that, but it's too early to say.

And at this time, I would like to return the floor back over to Edings Thibault for any closing comments.

Well, thank you very much. I'm going to Let Tim have the last word.

Yes, I just want to thank everyone for joining this morning on short notice. As you can hear, we are very excited about growing our capital markets business, about growing our scale internationally and about delivering a really strong financial profile with strong returns to Broadridge shareholders. So thank you very much. We're excited, and we're looking forward to closing this in the fourth quarter. Thank you.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.