Clearwater Analytics and Enfusion, Inc. today announced their 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 is $11.25 per share, delivered in an approximately equal mix of cash and stock. Additionally, Clearwater will pay $30 million to terminate Enfusion’s tax receivable agreement (TRA). This equates to a purchase price of approximately $1.5 billion.

“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,” said Sandeep Sahai, CEO of Clearwater Analytics. “Most importantly, this acquisition enables seamless data management from the front office to the back office, unlocking powerful network effects that amplify client value.”

Strategic Rationale

The acquisition of Enfusion accelerates Clearwater’s vision of building the first cloud-native front-to-back platform for the entire investment management industry:

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 that happens between the front, middle and back office, which in turn creates major reconciliation issues resulting in inefficiencies, inaccuracies and increased risk.

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 from it. 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.

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. We expect this to accelerate Clearwater’s journey from 1 basis point to 4 basis points (bps) journey and improve net revenue retention.

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 greater innovation within the industry. This expansion is expected to increase the company’s TAM by $1.9 billion.

Global Growth Opportunities: The international markets make up approximately 50% of Clearwater’s TAM 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. Having a significantly higher presence across these geographies will strengthen Clearwater’s ability to expand internationally.

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, greater presence across geographies, and increased TAM.

Secondly, Clearwater has built a highly robust 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 aggressively improve gross margin while improving customer satisfaction. Clearwater expects to bring those skills to Enfusion and has very high confidence of driving meaningfully improved unit economics, while also growing their emerging managed services business.

And thirdly, Clearwater expects considerable efficiencies in general and administrative expenses, yielding about $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.

”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,” said Oleg Movchan, CEO of Enfusion.

Michael Spellacy, Chair of the Enfusion Board and a member of the Enfusion Special Committee, said, “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.”