Ladies and gentlemen, thank you for standing by, and welcome to the Nasdaq's Verifin Acquisition Investor Analyst Call. At this time, all participants' lines are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker today, Mr.
Ed Dittmeier, Head of Investor Relations. Sir, you may begin.
Good morning, everyone, and thank you for joining us today to discuss Nasdaq's acquisition announcement of Verifin. On the line are Adena Friedman, our CEO Michael Ptasnik, our CFO Ann Dennison, our Controller and Chief Accounting Officer Lars Ottersconnor, our Executive Vice President of Market Technology and John Zaca, our Chief Legal and Regulatory Officer. After prepared remarks, we will open up to Q and A. The press release and presentation are on our website. We intend to use the website as a means of disclosing material nonpublic information and complying with disclosure obligations under SEC regulation update.
I would like to remind you that certain statements in this presentation and during Q and A may relate to future events and expectations and as such constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from these projections. Information concerning factors that could cause actual results to differ from forward looking statements is contained in our press release and periodic reports filed with the SEC. All forward looking statements speak only as of today, November 19, 2020, and Nasdaq assumes no obligation to update or revise any forward looking statements. I will now turn the call over to Adena.
Thank you, Ed. Good morning, everyone, and thank you for joining us on short notice so that we can discuss this morning's announcement that Nasdaq has come to an agreement to acquire Verafin, a leading provider of anti financial crime technology focusing on fraud and money laundering detection and investigation and serving 2,000 banks and credit unions in North America. This acquisition is an important step in our strategy to best position the company to be able to execute against the very sizable opportunities that we see as a technology and analytics provider. Verafin will join Nasdaq's trade surveillance and investigative workflow offerings to form a leading anti financial crime solutions provider within our market technology segment, putting us in a great position to deliver strong growth in this very attractive market. At the same time, Verafen enables us to accelerate our transformation of Nasdaq to a SaaS enabled technology and analytics provider to the industry.
Let me give a quick agenda for our prepared commentary today. First, I'm going to talk about our strategy of investing in and expanding our Market Technologies segment, how the attractive anti financial crime space fits into that and how this acquisition will impact Nasdaq's revenue composition and expected growth rates. Lars will discuss the extraordinary strategic and cultural fit between Nasdaq and Verifin and the opportunity in front of the combined businesses. And lastly, Michael will review how the acquisition fits into our financial and capital plans. Then we will open up the call to Q and A.
Let me first provide some context on the strategic path we've been on and how it led to what we are announcing today. In 2017, immediately after I started as CEO at NASDAQ, we undertook a strategic review focusing on how our clients' needs were evolving, broader macroeconomic and technology trends and how best to position this company for our long term opportunities. During that review, we were able to come to the conclusion that our market technology business, comprising core marketplace technology solutions and our leading trade surveillance offering, is well positioned to do more to solve important customer challenges today and in the future. As part of the strategic review, we clearly recognize that there are compelling characteristics and adjacencies of solutions that serve the broader anti financial crime space. Today, financial crime, including money laundering, is among the biggest and most difficult challenges that banks face around the world.
The United Nations Office on Drugs and the Crime estimates that a range of 1% to 2% of global GDP or 2 $1,000,000,000,000 a year and growing is laundered annually with less than 1% of criminal funds being frozen or confiscated. Regulators are becoming more demanding of banks, brokerages, fintechs and other financial intermediaries as the frontline defense against criminals using the financial system to fund their illicit activities. As a result, financial firms are faced with an ever increasing investment in people and technology to address this dynamic problem. In fact, Oliver Wyman estimates that the total spend in the anti financial crime space across the global banks and brokers is $42,000,000,000 of which $12,500,000,000 is spent on technology today. They also expect that technology spend to grow by 17% per annum through 2024.
And within the $12,500,000,000 spend, it is estimated that banks and brokers spend roughly $6,000,000,000 on anti money laundering, fraud detection investigation and trade surveillance, which represents the serviceable addressable market or SAM of Nasdaq and Verifin together within the anti financial crime space. With the combination of Nasdaq's Banks and Brokers business within market technology and Verifin's business, we estimate that our market penetration is currently only 3%, leaving an incredible amount of opportunity in front of our technology franchise. Now let me talk about Verafin and its impressive positioning within the anti financial crime space. Verafin was founded in 2003 in St. John's, Newfoundland and Labrador, a province within Canada, when founders Jamie King, Raymond Priddy and Brandon Brothers had a vision of using disruptive technologies and applying it in a new way to help fight financial crime.
They then focus more specifically on the ever growing problems that banks are facing on fraud and money laundering. They've built a sophisticated cloud based SaaS service that provides banks with a comprehensive and user friendly solution for detecting, investigating and the regulatory reporting of money laundering, wire and check fraud and other criminal activities involving money transfers and commercial banking. This led to the development of what has become a leading financial crime management platform, with almost with almost 98% retention. Barakins business is a SaaS based and hosted in the cloud with recurring contracted revenue comprising 97% of their total revenue. Over the last 3 years, they've added a growing list of regional retail and commercial banking institution clients that they specifically targeted
as well as
deepening their relationships with their existing clients over time. And over that period, Barafin has grown at an organic revenue CAGR of 30% with 2020 non GAAP EBITDA margin forecasted to exceed 25%, putting them in the elite tech category of being a rule of 50 company. As we consider how Verafin will fit financially within Nasdaq, I would like to provide a few key metrics. First, we expect Verafin to deliver at least $140,000,000 in revenue in 2021. 2nd, as we incorporate Verafin's revenue into ours on a pro form a basis for Q3 2020, the proportion of NASDAQ's ARR contributed by SaaS specifically would have been 33%, up from the 29% we previously disclosed at our Investor Day last week.
This increases our confidence that we can achieve the upper end of our 2025 ambition to have our SaaS revenue contribute 40% to 50% of our ARR. Lastly, we are raising the organic revenue growth outlook across the solution segments to 6% to 9% CAGR, up from 5% to 7% that we previously disclosed at Investor Day. As a reminder, our solutions segments are comprised of our market technology, investment intelligence and corporate platform segments. We're incredibly excited to add Verafin's people, technology and solutions to Nasdaq in what we believe is an ideal opportunity to advance our strategic ambitions while clearly accelerating Nasdaq's business and financial objectives. I'm now going to turn it over to Lars to talk about the strategic fit of Verafin within with our own anti financial crime business and what we expect of our expanded Market Technology segment going forward.
Thank you, Adena. First, I'm incredibly excited about this transformative step for market technology and how it further excels our ambitions. The mission and core values of Verafin perfectly align with our own client's power culture. We are very excited to work with the team in St. John's, Newfoundland and Labrador, and we are committed to further supporting the growth and innovation by both investing in local talent and connecting Verafin to our international client base.
As Adena mentioned, the addition of Verafim will further accelerate our evolution towards a true SaaS enabled technology provider, while solving some of the industry's most difficult challenges in addressing financial crime. On the technology side, Verafin employs engineering principles focusing on scalable cloud based services and small integrated engineering teams that embrace a fully agile approach, including weekly development cycles. The Verafim team is focused, committed and mission driven in its efforts to fight crime with advanced and nimble technology solutions. The Verafin team has done an outstanding job of meeting the ever more complex needs of its bank clients as it has moved up from serving smaller banks to becoming the provider of choice for midsized banks across North America. Additionally, Verifin is the exclusive technology provider to a consortium of several of the largest global banks in their efforts to collaborate with law enforcement to fight crime by collecting and sharing information that assist in investigating large criminal syndicates.
As they continue to move up to the Tier 1 and 2 banks, Nasdaq can play significant role in accelerating the growth and penetration of that segment. Nasdaq today provides sophisticated trade surveillance capabilities to 170 Tier 1 and Tier 2 banks worldwide. As the risk and compliance functions are merged within the larger banks, we can unlock opportunities to broaden the scope of the services we provide to solve for market manipulation, insider trading, money laundering and fraud schemes and become a more comprehensive provider of anti financial crime solutions for banks and brokerage clients over the coming years. We believe that this collaborative approach is ultimately the only effective way for the industry to fight increasingly complex financial crime. While on their own, both Verafin and our own surveillance products incremental opportunities the combination can catalyze.
We both provide nimble SaaS based solutions, which differentiates us from many of the incumbent providers in the industry today. We are leaning into the future needs of the industry. Importantly, Verafin also changed the performance and financial proof file of our broader market technology business. 1st, on a pro form a basis, for the 12 month period ending of September 30, 2020, the addition of Verafin's significant SaaS revenue footprint is expected to move SaaS revenue contribution 50% of total Market Technology revenue, up from 35% previously. 2nd, we expect that it will add 500 basis points to the growth trajectory of market technology, and we're raising our medium term 3 to 5 year organic revenue outlook from to 13% to 16%, up from prior growth targets of 8% to 11%.
Thirdly, the combination with Verafin raises the margin profile of market technologies and in combination with the way it improves revenue growth, moves us much closer to the Rule of 40 ambition we have set for ourselves. We now expect to achieve the Rule of 40 numbers in 2023 versus our prior ambition of 2025. To speak more about the financial details on the transaction, I will now turn the call to Michael.
Thank you, Lars, and good morning, everyone. I will first talk about how Verifin meets our M and A criteria, then discuss the purchase valuation and how we intend to finance it and then go over the modeling considerations. 1st on strategic fit and how the acquisition accelerates our evolution as a SaaS enabled tech and analytics provider. Expanding from our existing anti financial crime capabilities and surveillance to address the anti financial crime more broadly is a very natural step for us and Dina has discussed how we believe the combination can catalyze further organic growth opportunities. In terms of how the acquisition accelerates our strategic evolution, it expands the contribution of SaaS revenues to our ARR and we get closer to the milestone of having half of our revenue contribution from our fastest growing Market Technology and Investment Intelligence segment with about 47% of Q3 2020 revenue on a pro form a basis.
2nd, Verifin enhances our performance and valuation potential. In particular, as Adena mentioned, it drives our organic revenue growth outlook over the medium term to a 6% to 9% CAGR from 5% to 7% today and can contribute to our TSR through both earnings accretion and valuation enhancement potential. Please note that our organic revenue growth calculation methodology normally excludes acquired businesses until they have been part of NASDAQ for a full 12 month period, But we'll be sure to update you on Verafin's initial progress in 2021 as we give our quarterly updates. Lastly, the transaction creates economic value. It accretes to NASDAQ earnings by 2022 and is expected to generate ROIC above our cost of capital in the long term while supporting an enterprise ROIC at or above 10% in the medium to long term.
The purchase price of $2,750,000,000 represents a 19.5 times multiple on estimated 2021 revenues in 20.21 revenues in excess of $140,000,000 in line with other high growth rule of 50 best in category SaaS solution providers. The valuation on this asset reflects its strong core economic fundamentals. Specifically, with regard to the 2021 revenue projections, 90% of those revenues are already represented in the expected year end 2020 contracted ARR, which includes both current subscription revenue as well as signed contracts, which will be moved into the revenue recognition phase shortly. The business is demonstrating scale against an ongoing investment in its capabilities to enhance continued high growth with a 25% to 30% EBITDA margin. We expect to fund the purchase with a combination of cash on hand, bond issuance, a term loan and commercial paper with an expected blended cost of debt in the 2% to 2.5% range.
Gross leverage will be around point 9 times pro form a non GAAP EBITDA at close and then we expect to gradually see that come down moving forward. With our very cash generative model, we plan to continue to execute on our existing capital plan, funding our growth initiatives, adhering to our dividend policy, executing on our share repurchase program and managing our balance sheet leverage in a manner consistent with our current investment grade credit rating. NASDAQ's reported revenues will be impacted in the short term by a purchase accounting write down of Verapen's deferred revenues required under U. S. GAAP.
We expect that the adjustment will impact 2021 and to a very modest extent 2022 revenues. It will not impact cash flows or medium to longer term reported revenues. We'll provide more details after the transaction closes. And while the deferred revenue write down will in some earnings dilution in the near term, the transaction is expected to be accretive to earnings in 2022 with rising impacts in future periods. The transaction is expected to close in the Q1 of 2021 and is subject to regulatory approvals and customary closing conditions.
Thank you for your time. And with that, I'll turn it back to the operator for Q and A.
Thank And our first question comes from Rich Repetto from Piper Sandler. Your line is open.
Yes. Good morning, Adena. Good morning, Michael. I guess my question is, you talk about the compound annual growth rate. This business has grown fast 30% over 3 years.
Can you talk what's the trend here, say, the last year? Is it accelerating or staying the same? And then I'm back, when you up the whole market technology growth, I think that's the 5 points, I guess, of organic growth. So I back into like a high teens growth rate of barofen. Is that just trying to see whether those numbers are in the ballpark?
Hey, Rich. Yes. So first of all, in the last year, I would say that it's been on par with the last 3 years. So it's really been within the range of the 30% we mentioned. And then in terms of going forward, I think that we give you a range, right?
So the 500 basis points, I think that we would argue that that is a very robust growth rate. We're not giving exact numbers, but we giving you the 30 percent and then showing you what 2021 looks like is kind of a little bit more in line with how we are looking at the company going forward.
Got it. Okay. Thank you very much.
Sure.
Thank you. And our next question comes from Alex Kramm from UBS. Your line is open.
Yes. Hey, quick one from me along the same lines. This is a SaaS business, so I assume very high incremental margins. So can you talk about the margin trajectory and how I should be thinking about the expense growth? How it's going to impact the overall outline expense growth for NASDAQ or how the expenses for this company or this company on a standalone basis should be trending in the next 3 to 5 years?
Thanks.
Yes, sure. Thanks, Alex. So yes, I mean in terms of looking at serving their current clients, their current client base and continued growth within their current client base, the incremental margins on every new client is very high. I think though that we do want to make sure that we can continue to invest in the platform so that we can take it into the largest banks in the U. S.
And take it overseas into Europe because they're not they haven't brought their business anywhere outside of North America yet. So those are areas that we're going to want to continue to invest in, which will then create a little bit more of a I would say, it won't really optimize the margin in the short term because we want to make sure that we're investing for the long term. So I think that we certainly expected to have a very attractive margin profile, but we want to like maximize the margin accretion in the short run so that we can make those investments right away.
Thank you.
Yes. Thank you. Our next question comes from Alex Blostein from Goldman Sachs. Your line is open.
Great, thanks. Good morning. Just a quick follow-up around expenses again, very attractive growth profile as you guys talk about 500 basis points added to Market Tech. How is this going to change the overall NASDAQ organic expense growth profile beyond next year? So I think during the Investor Day, you guys talked about 2.5% to 3%, I think, expense growth for the company overall.
Does this change that at all?
Yes. I think at Investor Day, we kind of gave a range of 2% to 4%. But I think that as we get into and provide guidance for 2021 in January and that will be closer to when we close, we'll be able to provide you maybe an updated view of kind of the organic expense growth rate over the longer term. But certainly, it's a good consideration, but I would not say it's going to materially change our profile of the growth, but we will make sure that we update that in January.
Great. Thank you. Our next question comes from Ari Ghosh from Credit Suisse. Your line is open.
Hey, good morning, everyone. So just looking at Slide 10, where you talk a little bit about Verifin's customer base and the untapped markets over there. Can you just talk a little bit about the customer profile of Verifin versus your own existing customer base? Is there is this entirely separate markets? Is there overlap?
I'm just trying to understand, number 1, if you're layering in materially new customers, if there's a lot of cross sell opportunities here down the line, just any color on that would be great.
Yes, sure. I would say that they're starting to show some overlap because of the fact that they started out really serving the smaller banks and credit unions and they are very disciplined. And so they've kind of took that part of the market and really captured that market. And then they moved up and they said, okay, now we're going to address the midsized banks. And they really have done a great job of addressing the midsized banks.
And now we're moving up they've been moving up into the Tier 2 banks. And they're really, I would say, relatively early on the journey in Tier 2, but they have a really good solution for them. And that's where we start to really intersect, right? So Tier 1 and Tier 2 banks are where we are the banks we serve. And when we look at actually the spend of the industry, the Tier 1 and Tier 2 banks spend about half the TAM, and the smaller banks spend the other half the TAM.
So they're really just starting to capture about the half of the market. And that's where we come into play because we do believe that we have a lot of cross selling opportunities within our client base and we can really move them into those clients and create a more joint offering over time that can really address broader needs. So that's why we see it as that's where we really bring synergistic value is really accelerating their move up into the Tier 1 and Tier 2 banks and then getting them to go to Europe because twothree of the revenue in our surveillance business come from outside the U. S, whereas all of their revenue today comes from North America. So we have a really great opportunity to take them into our bank clients across Europe, I think, would be the next place we'd go.
But we will have some investments, as I mentioned, just a few minutes ago with Alex's question. We do have some investments to really, advance the product to make it so that it's highly relevant for the largest banks. And we do think we actually we spent a fair amount of time working with them on that strategy so that we know what the investments are and how we want to make them so that we can address those needs as quickly as we can. So we're I have to tell you, we're super excited about being able to introduce them to our clients because their solution is superb. I mean, it really is a best in class product.
Got it. Thanks so much.
Thank you. Our next question comes from Jeremy Campbell from Barclays. Your line is open.
Hey, thanks. First, just want to clarify, Adena, that this deal took the SAM for $2,000,000,000 $6,300,000,000 from I think $3,800,000,000 when we checked in last week at the Investor Day. Is that right?
I want to make sure that $3,800,000,000 is that just for the
I think just anti financial crime, I think is what it was, the implied.
Yes. And I know why, because with the so the answer is yes, but that's because of the AML solution that we launched a few weeks ago that kind of entered us into more of the AML space and now we have AML and fraud. But I would say that Osprey's position or their solution is a very comprehensive AML solution, whereas ours is kind of a niche product within AML. So it gives us a better position to be able capture that full 3.8 plus the fraud space. So we do feel like we're really well positioned, but you're right, it kind of doubled.
Think about it as essentially doubling the TAM.
Got it. And then just can you maybe just a follow-up on Ari's question here is, can you just characterize some of the primary hurdles or pushbacks you might get to either kind of cross selling to the non overlap customer base or taking your now more end to end holistic stream with some of your other services and kind of moving up to those Tier 1, Tier 2 financial institution?
Yes. I think that they definitely already have a solution that's really well positioned to address the Tier 2 needs. But when you get up to the Tier 1 needs, first of all, it's they're generally global banks. And so we want to make sure we have the proper integrations into the banking systems that may not be addressing just the North American business. And then the second thing is to really continue to advance some of their data management and scaling so that they can handle just massive data loads in a real time basis.
And that's frankly what we're really, really good at. Like that's where we provide really unique engineering expertise in terms of being able to handle massive data loads in a low latency real time environment. So I think that's what we think we can really bring to the table to get that so that they're ready for the Tier 1 banks.
Great. Thanks a lot.
Thank you. Our next question comes from Chris Allen from Compass Point. Your line is open.
Good morning, everyone. So in 3Q 'twenty pro form a, Veritone would have accounted for 200 bps of revenues. It's about $14,000,000 or so annualized $60,000,000 Just wondering the step function to get to the 2021 revenue target. I understand this 90% is in ARR. I wonder if you could give us a breakdown in terms of what's new customers or what's existing customers expanding what they're doing with Verafen or is there any price increases in there as well?
I'll hand that one to Michael.
Yes. So the revenue growth really comes from 3 areas. It comes from, number 1, continued client growth. In addition to that, the revenue per client increases as their contracts renew. That reflects really the value of enhancements that they do on a continuous basis in the product.
And so as they add those over the preceding period, so when they go to renew the contract, the new contracts reflect that additional value. And then they also have additional products and solutions that they sell into existing client base. So it's really contributions do come from all three areas.
Any rough breakdown in terms of what's from 2020, 2021 in terms of percentages of those 3?
No, we're not breaking down those percentages, but I would say that they all have meaningful contribution.
And then just on the Tier 2 banks, Tier 1 banks, what are they using currently for anti crime solutions? Is it mostly in house?
Yes. So I think that I'm going to hand that one to Lars in a second, but mostly in house. And then they do have there are some, I would say, on prem providers. So Lars, do you want to kind of walk through that a bit?
Sure. So yes, there's a lot of in house field where data scientists include in their own IT departments are building solutions. And then the map of solution providers are a very scattered map where literally hundreds of providers from very different types of providers. You have small niche providers. You have bigger providers that are more industry specific and then you have big general tech companies providing technology to those clients.
But a lot is built in house and actually a lot is also very manual processes today.
Thank you.
Thank you. Our next question comes from Owen Lau from Oppenheimer. Your line is open.
Yes, good morning. Thank you for taking my question. I just have a quick one on Slide 17. So on a pro form a basis, you got to 33% SaaS as a percentage of ARR. I think your target is 40% to 50% by 2025.
So it's very close to the lower end of your target already. How should we think about the walk from 33% to maybe like 40% to 50% over the next 4 to 5 years? Do you assume any like acquisitions in your assumption? Thank you.
Hey, Ellen. Yes. So that number really assumes kind of organic growth from here. And what I said in my prepared remarks is just that we believe that we can get to the higher end of that 40% to 50% with the addition of Verafin, because of the fact that we're now starting at a higher percentage, the 30 3% and their growth rate is so high that we do think that we'll be able to get to that higher end by 2025 on an organic basis from here. So we've given you a range before and we're kind of just showing an increased confidence to get to the higher end of it.
Okay. Thank you.
Sure. Thank you. And our next question comes from Brian Bedell from Deutsche Bank. Your line is open.
Thanks. Good morning. Just two questions. One is on the tapping the Tier 1 and Tier 2 banks. Can you talk a little bit about your willingness to customize to their need or the ability for the platform to customize to their needs?
And to what extent are you looking for full solutions as opposed to piecemeal sort of wedges into those institutions, if you could just talk a little bit about that? And then the second question is just on the financials. When do you what is your target debt to EBITDA after this deal in terms of when where you want to land and about over what timeframe?
Okay, great. So with regard to the Tier 1 banks, I would say this, I think that the Verifin platform today is the clients that they serve at the lower end take the holistic solution and everyone gets the same solution. It's actually one of the benefits that the banks see because they do weekly release cycles. And so every time that there's a new feature or function that few clients want, they basically offer them to all the clients. And that's actually how we run our trade surveillance business as well.
So the technology we do really we don't do them weekly, but we do release cycles and every client gets the benefit of enhancements. I think though that as they've moved up to the larger banks, they've actually componentized their solutions so that while they can offer a full range of solution just for this one fraud area. Maybe they go in and they wedge in with tech fraud, for instance. And so they can provide that component. And then obviously, the land and expand is kind of what they focus on with the medium banks medium sized banks.
I think that as they continue to move up, they also are their system allows for what they call custom configuration, but they don't want to do like one off customized very specific implementations just for one bank's very specific needs, but they will do what they call customs configurations that make it so that the banks can configure the system pretty nimbly to meet any specific needs they have. So that's kind of their approach. And that's actually frankly consistent with how we've built out NFS. If we think about like how we're going to serve our clients going forward on the trading and clearing side, we've basically built out a library of configurations that allow us to custom config for a client as opposed to having to build code from scratch just for that one customer. So it's a very similar approach.
In terms of the financials, I'm going to hand that one over to Anne.
Okay. Yes. So on the delevering question, our strong capital generation will enable us to delever quickly. We haven't set a specific target date, but our intention is to get back to our current rating level while continuing our consistent approach to capital deployment. So we'll continue to invest for growth.
We'll continue to grow dividends as earnings and cash flows grow, and we'll continue to execute our stock buyback program primarily offset dilution. But our intention again is to maintain our status as an investment grade issuer. And as we demonstrated after the eVestment transaction, we will delever to get back to our current rating level.
And just on the current rating level, do you think the rating agencies would view this as more stable revenue profile, therefore, you could carry a higher debt to EBITDA ratio than you were before this deal?
So the way we look at obviously the rating agencies will have to come to their own conclusions. But we do feel that this enhances our profile. It's very much in line with what we talked about at Investor Day, 72% of our revenue, recurring revenue and this adds to that profile. So obviously they'll have to come to their conclusions. But we do think that we're on this path and it continues to enhance that ARR aspect of our business and that we have communicated our leverage intentions and that wanting to maintain our ratings profile.
And so again they'll have to decide how this all comes together. But we feel very good about the way that we are both the revenue profile and then our deleveraging intentions.
Great. Thank you.
Thank you. Our next question comes from Kyle Voigt from KBW. Your line is open.
Hi, thanks. Maybe just a first question, just a follow-up on the debt financing. I guess what percentage of the consideration should we assume will be financed with long term debt?
Yes. So we're still determining what the final outcome of that would be. But we would say roughly at this point in time and it could vary, we'd say roughly 1 $1,250,000,000 would be coming in longer term debt. And then we'll be using mix of shorter term imbalance to that. But we'll continue to assess that as we go through the approvals process and the transaction.
Yes. And I would say that, that means obviously the benefit of having a combination is the long term debt obviously positions us really well, but then the shorter term, floating rate that allows us to delever, right? So it kind of gives us that ability to go in and delever over the coming years.
Got it. And then just a follow-up. Adena, I think you mentioned they're kind of in this elite level of being in the rule of SIM. I guess just how sustainable do you feel for this Verafin business specifically, how sustainable do you think that is over the long term for that business? And is there actually potential for that to move higher kind of under your ownership?
Yes. I mean, I can say this. I'm highly confident that we have bought an elite company in the Rule of 50 that is sustainable. I also would say that depending on how successful we are in executing against our strategy of bringing them to the larger banks, we have an ability to continue to accelerate their growth profile. But we also again want to make sure we manage it through the right investment mix.
So we would say that we are very comfortable that they are just a truly elite SaaS provider, and we can continue to manage them that way. But again, we're not going to optimize for margin in the short term because we want to really optimize for growth over the long term right now.
Okay, makes sense. Thank you.
Thank you. Our next question comes from Alex Blostein from Goldman Sachs. Your line is open.
Hey, thanks again. Thanks for the follow
This one is for Michael. Just want to make sure that I caught the number. Did you guys talk about the amount of deferred revenue write down in 2021 and whether or not that's incorporated, I guess, in the $140,000,000 And as we think about sort of the recovery of that, will it fully be recaptured in 2022? And maybe what that amount will be? Thanks.
Yes. So the deferred revenue write down is not included in the $140,000,000 estimate. We will finalize that once we close the transaction. We'll take a look at the balance sheet then. And so we'll provide an update the quarter when we close the transaction.
And so we don't think that it will have much of an impact on 2022. So most of the impact will be on 2021. But again, we'll provide you with that update once the transaction closes.
Thanks.
Thank you. And I am showing no further questions from our telephone lines. I'd now like to turn the conference back over to Ledeana Friedman for any closing remarks.
All right. Thank you very much and we really appreciate you getting on the phone on short notice. We're obviously very excited about this acquisition and we're excited about giving you all exposure to the Verafin organization over time. We just we think this is just a great strategic next step for us. We believe that our brand is very consistent with integrity and making sure that we manage quality of markets and really enhance the quality of the financial system.
And we think that Verifin combined with our surveillance business will really provide us a great opportunity to be crime fighters in the financial markets and in the financial system in a way that's really meaningful to our clients and meaningful to the industry. So we are very excited and we really do appreciate your time today. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.