Clearwater Analytics and Enfusion announced an entry into a definitive merger agreement for Clearwater to acquire Enfusion, a leader in software-as-a-service (SaaS) solutions for the investment management and hedge fund industry. The purchase price was $11.25 per share, delivered in an equal mix of cash and stock. And Clearwater will pay $30 million to terminate Enfusion’s tax receivable agreement (TRA). This totals a purchase price of approximately $1.5 billion.
The deal accelerates Clearwater’s vision of building the first cloud-native front-to-back platform for the entire investment management industry:
1.) Front-to-Back Platform Leadership – Enfusion’s front-office capabilities—including IBOR, portfolio, and order management—will be integrated with Clearwater’s middle and back-office solutions and client reporting capabilities to enable a unified, cloud-native platform that seamlessly integrates with other technologies. This will allow clients to avoid the error-prone data handoff between the front, middle, and back office, creating significant reconciliation issues resulting in inefficiencies, inaccuracies, and increased risk.
2.) Enhanced Right to Win in Asset Management – Approximately two-thirds of Clearwater’s core TAM comes from the asset management industry, but the company derives only one-third of its revenue. Enfusion has developed a next-generation platform for asset managers, starting its innovation in the front office. Clearwater, on a parallel journey, has built a disruptive platform focused on the middle and back office, specifically in data ingestion, aggregation, accounting, compliance, regulatory reporting, and comprehensive client reporting. By combining both sets of solutions and engineering expertise, Clearwater aims to significantly enhance its right to win with asset managers across various segments, geographies, and sizes.
3.) Expanded Capabilities for Clients – With very high levels of client satisfaction, as reflected in Clearwater’s high NPS score, the company has consistently been asked to do more in adjacent segments of its workflow. With this combination, Clearwater’s clients in the insurance, asset management, and asset allocator sectors—including corporations, governments, pensions, endowments, foundations, and REITs— will, in due course, benefit from seamlessly integrating Enfusion’s IBOR and its portfolio and order management software with the Clearwater platform. The company expects this to accelerate Clearwater’s journey from 1 to 4 basis points (bps) and improve net revenue retention.
4.) Increased TAM and Hedge Fund Leadership – The acquisition positions Clearwater to expand into the hedge fund industry. Enfusion has an outstanding track record and wide acceptance as the leading end-to-end platform for hedge funds and, more broadly, liquid alternatives. By adding dedicated engineering, product, and client operations teams, Clearwater aims to accelerate growth and drive more significant innovation within the industry. This expansion is expected to increase the company’s TAM by $1.9 billion.
5.) Global Growth Opportunities – The international markets comprise approximately 50% of Clearwater’s TAM. However, but the company derives less than 18% of its revenue from outside the U.S. Enfusion’s strong international presence, with 38% of its revenue generated in Europe and Asia, is expected to accelerate Clearwater’s global adoption strategy. A significantly higher presence across these geographies will strengthen Clearwater’s ability to expand internationally.
6.) Significant Synergy Opportunity – The combination presents significant synergy opportunities across multiple fronts. Clearwater believes it will help accelerate Enfusion’s growth based on the increased right-to-win, back-to-base sales, more substantial presence across geographies, and increased TAM.
Clearwater has created an execution infrastructure across New Delhi, Edinburgh and Boise that operates effectively and at scale. Over the past few years, Clearwater’s operating rigor and its ability to harness Generative AI has allowed the company to improve gross margin while improving customer satisfaction aggressively. Clearwater expects to bring those skills to Enfusion and has high confidence in driving meaningfully improved unit economics while growing their emerging managed services business.
And Clearwater expects considerable efficiencies in general and administrative expenses, yielding around $20 million in cost savings, which we believe will be delivered over the first two and a half years after close. In the Enfusion business specifically, Clearwater expects to deliver 400 bps in Adjusted EBITDA margin expansion in the first year after close and an additional 400 bps in the second year after close.
The merger agreement was unanimously approved by a Special Committee of the Board of Directors of Enfusion, consisting of directors independent of Enfusion’s TRA holders and the Boards of Directors of both companies. Certain shareholders of Enfusion affiliated with FTV, ICONIQ, and Movchan, collectively holding approximately 45% of Enfusion’s total voting power, have entered into voting and support agreements in favor of the transaction. The transaction is anticipated to close in Q2 of 2025, subject to approval by Enfusion shareholders, the receipt of required regulatory approvals, and customary closing conditions.
Enfusion management expects the preliminary full-year 2024 revenue of about $201-202 million, representing 15-16% year-on-year growth, and preliminary Annual Recurring Revenue (ARR) as of December 31, 2024, of approximately $210-211 million, representing 13-14% year on year growth.
J.P. Morgan Securities is serving as financial advisor to Clearwater Analytics. Committed financing for the transaction has been provided by JPMorgan Chase Bank, Kirkland & Ellis is serving as legal advisor to Clearwater Analytics. Goldman Sachs is serving as exclusive financial advisor to Enfusion’s Special Committee. Dechert is serving as legal advisor to Enfusion’s Special Committee, while Goodwin Procter is serving as legal advisor to Enfusion.
KEY QUOTES:
“Today’s announcement is about creating a future where our clients benefit from the synergy of two highly complementary, innovative software leaders, paving the way for a unified, cloud-native front-to-back platform that’s primed to serve institutional investors like never before. We expect to accelerate growth based on our increased right-to-win, higher back-to-base sales, greater presence across key geographies and increased Total Addressable Market (TAM). Coupled with our operating rigor and use of Generative AI, we have high confidence that we can drive meaningfully improved unit economics at Enfusion while also growing its emerging managed services business. Most importantly, this acquisition enables seamless data management from the front office to the back office, unlocking powerful network effects that amplify client value.”
- Sandeep Sahai, CEO of Clearwater Analytics
”This transaction marks an exciting new chapter for all of Enfusion’s key stakeholders. Since our inception, we have proven that the versatility, scale, and depth of our solutions captures the hearts and minds of both traditional and alternative investment managers. Together with Clearwater, our shared passion for building innovative technologies and enriching every aspect of the client journey will now accelerate and enhance our combined ability to support our clients’ evolving needs–whether they are expanding into new strategies, asset classes, or geographies. That commitment will ensure our clients remain on the cutting edge of investment management technology.”
- Oleg Movchan, CEO of Enfusion
“Our agreement with Clearwater represents the culmination of a comprehensive process to determine the best path to maximizing value for all Enfusion shareholders. Our review of potential strategic alternatives for Enfusion was led by a Special Committee composed of independent directors and advised by independent legal and financial advisors. We are pleased to have reached an agreement that will both deliver significant and immediate value to Enfusion’s shareholders, and, together with Clearwater, provide our shareholders and employees with the opportunity to participate in meaningful potential upside.”
- Michael Spellacy, Chair of the Enfusion Board and a member of the Enfusion Special Committee
“Building on the momentum of our strong Q3 2024 results, we continue to see strong business momentum in Q4, and we are confident in our ability to meet and exceed the guidance provided for the fourth quarter and full year 2024. This outstanding ARR growth allows us to look ahead to 2025 with high confidence. These achievements reflect the durability of our business model and our disciplined approach to growth, which positions us to execute this transformative acquisition effectively. With Enfusion, we are taking a bold step forward, uniting two innovative platforms that will redefine investment management, deliver meaningful efficiencies, and expand our global reach.”
- Jim Cox, CFO of Clearwater Analytics
