Private equity firm Carlyle Group recently approached Nasdaq OMX Group about taking the exchange operator private, but the talks fell apart over a disagreement on price, sources familiar with the deal said on Monday.
Carlyle initiated the discussions and was in early stages of due diligence when differences emerged, bringing the talks to an end, a source familiar with the matter told Reuters.
Shares of Nasdaq rose 3.1 percent at $30.38 on Monday in regular trading.
Management at Nasdaq has long felt the company is undervalued compared with its peers, two separate sources said. Nasdaq's board has a fiduciary responsibility to consider all offers.
All of the sources asked not to be identified because they are not authorized to speak publicly on the matter.
The talks, first reported by Fox Business Network, occurred about three weeks ago.
Nasdaq spokesman Joseph Christinat said the company does not comment on market rumors or speculation. A spokesman for Carlyle declined to comment.
Taking Nasdaq private makes sense from one perspective, because the company generates strong free cash flow, which would help a private equity firm structure a deal, said Rich Repetto, an analyst at Sandler O'Neill.
On the other hand, it is not clear what Carlyle could do to improve the value of Nasdaq, which has long made cost controls a priority, and it might be difficult for Carlyle to exit its investment, he said.
"Usually PE firms think that there could be massive costs taken out, or a massive restructuring that needs to be done out of the public's eye, but that doesn't appear to me to be the case ... Nasdaq is run pretty efficiently," he said.
Nasdaq itself has been active on the acquisition front, most recently proposing to buy Thomson Reuters' investor relations, public relations and multimedia services units for $390 million. The deal is expected to close in the first half of this year.
Nasdaq Chief Executive Bob Greifeld also recently said he would consider bidding for Euronext, the operator of the Paris, Amsterdam, Brussels and Lisbon stock exchanges, if it were put up for sale.
Exchanges Under Pressure
The talks came just weeks after Nasdaq rival NYSE Euronext said it was being bought by IntercontinentalExchange Inc in a cash and stock deal valued at $8.2 billion when it was announced in December. That works out to $33.12 a NYSE share, a 28 percent premium to the stock's closing price before the deal was announced.
Warren Buffett's Berkshire Hathaway Inc in November also bid for the Big Board parent. The Berkshire offer fell short, but it highlighted the interest in the sector.
Exchanges have been under pressure due to several years of declining trading volumes amid macro-economic uncertainty and long periods of low market volatility.
Nasdaq has in recent years placed an emphasis on diversifying away from transaction-based revenues, to more stable sources of income, such as through providing technology and data to other companies.
Transaction-based revenues make up 29 percent of Nasdaq's overall revenue, though the company recently said that number would fall to around 25 percent once the Thomson Reuters deal goes through.
Almost two-thirds of NYSE's revenue are transaction-based.
Nasdaq's moves to diversify, along with renewed investor interest in stocks in January, have helped push the exchange operator's stock up around 22 percent so far this year.
Of the four private equity firms that trade publicly, Carlyle is the only one listed on the Nasdaq. KKR & Co LP, Apollo Global Management LLC and Blackstone Group LP are listed on the New York Stock Exchange.
Carlyle Chief Financial Officer Adena Friedman joined the firm in early 2011. Prior to that, she had been at Nasdaq since 1993, where she held several posts, including CFO. When she joined Carlyle, market players immediately speculated that the firm might go public on the Nasdaq, which it did in May last year.