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Bid for New Customers Behind ConvergEx's Buying Spree
Traders Magazine Online News, December 14, 2009
The close on Monday of ConvergEx's purchase of NYFIX U.S. Transaction Services highlights a flurry of acquisitions for the agency brokerage and technology firm.
Joseph Velli, ConvergEx
After two years of silence on the acquisition front, ConvergEx bought a handful of businesses over a 46-day span this past autumn in an effort to bring in new clients.
ConvergEx on Oct. 8 agreed to buy Cogent Consulting, a commission management business; on Nov. 9 agreed to buy NYFIX's U.S. Transaction Services, which include Millennium, a dark pool that caters to the sellside; and on Nov. 23 agreed to buy NorthPoint Trading Partners, a boutique prime brokerage. While the first two acquisitions expand existing ConvergEx product offerings, NorthPoint adds a new business line altogether.
All three introduce new technology, something on which the firm is particularly focused, said Joseph Velli, the chairman and chief executive of ConvergEx Group. The firm has two core businesses: investment technology services and execution solutions. And the three acquisitions fit ConvergEx's goal to build out its technology offering, Velli added.
"We're pretty excited," he said. "All three help to expand our business model, especially by bringing in new technology. And both of our businesses are very reliant on technology."
ConvergEx's last acquisition occurred in July 2007. It bought LiquidPoint, a provider of execution management technology and brokerage services for listed options, which is run by Tony Saliba.
ConvergEx plans to incorporate the staffs of all three firms; there are no redundancies, Velli said. The firm purchased Millennium for $5 million in cash. Cogent and NorthPoint were purchased for cash and stock. ConvergEx would not disclose the price tag for either one.
On the commission management front, the Cogent purchase lets ConvergEx add products to fill out its offering. These products include technology for the broker vote, the allocation and reporting of the commission spend and for payments.
ConvergEx can now access Cogent's "hundreds" of broker participants. And ConvergEx can also cross-sell into Cogent's client base of large money managers, said John Meserve, chief executive of Westminster Research Associates, a member of BNY ConvergEx Group.
The NYFIX purchase, through the Millennium ATS component, opens ConvergEx up to sellside liquidity. And it taps a customer segment Velli said ConvergEx is keen to develop.
Millennium is the firm's third in-house dark pool. It operates independently alongside ConvergEx's streaming ATS for institutions, VortEx, and its dark block-trading platform, ConvergEx Cross.
One competitor in the ATS space said he didn't know of ConvergEx's plans for the acquisition. But he thinks ConvergEx would benefit if it lets Millennium and VortEx connect to one another. "When your customers come in," he said, "the more liquidity you have the better chance you're going to have to get a match before you have to send [the order] away."
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