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December 1, 2010

Relationships Matter in WRG Deal

By Michael Scotti

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  • Relationships Matter in WRG Deal

The deal that sent public policy experts Washington Research Group to MF Global was the work of two former Citi execs and shows that strong relationships in trading still carry weight.

Robert Moore

"With a firm our size, we couldn't build the sales force fast enough to take advantage of the product cycle," said Robert Moore, who heads capital markets at Concept Capital, and which sold Washington Research for an undisclosed price on Oct. 26. "It's a global product now, and we didn't have the distribution. We realized that, and Washington Research realized that, as well."

WRG specializes in public policy issues in Washington, D.C., and investors are attuned to the bevy of new laws that affect publicly traded companies in health care, finance and the environment. Moore pointed out that investor demand was heavy in Europe, Asia and Australia, so WRG needed a bigger platform, one that was global.

Peter Forlenza, MF Global's head of equities worldwide, and a colleague of Moore's at Citi, said WRG will be the cornerstone for the firm to build its U.S. equities business. It will continue to look for specialized research products. In the meantime, fresh from WRG's annual post-election conference--last week's was its 33rd Washington Symposium--Forlenza said he was impressed with the new product. "It has never been more relevant, and it has never been in higher demand," he said.

Both execs agreed MF Global was a better fit. Concept wasn't about to build WRG into a global product, and MF Global already had research sales teams around the world. In addition, MF also had accounts open with the major global accounts, so the transition was reasonably seamless, Forlenza said.

The transaction was considered nonmaterial. For MF Global, that means the price tag was less than $5 million.

The deal began with Forlenza investigating ways to expand the firm's U.S. equities business. He had been looking into the mini-prime area and had been meeting with Moore, his old boss. Concept Capital offers hedge funds a risk management product and an administration platform. The conversation eventually focused on WRG.

The deal gives MF Global its first traditional cash equities product in the U.S. And that was another attraction: There was no overlap in trading or sales. Since Forlenza joined MF a year ago, the firm has added desks for equity derivatives and program trading. But it lacked a high-touch desk. The WRG deal adds 17 policy research analysts, as well as six sales traders and nine research salesmen.