Less than four months after Cogent Consulting’s sale to a broker-dealer consortium unraveled, the commission management firm found a willing buyer in CongvergEx, an agency brokerage with a large soft dollar business.
The move lets ConvergEx add key components of the commission management process to its product, including broker vote management, broker allocation and an ability to centralize commissions across different commission types. Cogent gives ConvergEx the ability to offer a comprehensive commission management tool. The technology extends from the broker vote to the allocation and reporting of the commission spend to payments.
The purchase lets ConvergEx sell products to the sellside. In addition, the firm can also cross-sell into Cogent’s "significant" client base of large money managers, said John Meserve, chief executive of Westminster Research Associates, a member of BNY ConvergEx Group.
"We’ll be able to help put real gas behind their sales effort into our 1,400 soft-dollar relationships," he said. "The synergies are there."
ConvergEx gains access to the "hundreds" of Cogent broker participants, as well as its approximately 100 buyside participants, Meserve said.
Cogent sold in order to access ConvergEx’s important institutional contacts, or those who make their respective firms’ commission management technology decisions, Meserve said. The firm had built itself out as far as it could and needed another firm behind it to grow further, he added.
"The sales process, and accessing the key buyside contacts who make decisions around this, is not an easy process," he said. "You’re calling in and trying to get a meeting with people. And these are people we already work with."
Summit, N.J.-based Cogent will remain a wholly-owned subsidiary. This will ensure ConvergEx keeps its data integrity and other information safeguarded and separate, Meserve said. Cogent will also keep its sales force, among its 30 employees.
"They have their own sales force," Meserve said. "But obviously, we’ll be able to cross-sell this into our clients. We’re going to leverage the product to our clients who have been asking for it."
Cogent founder Robin Hodgkins will continue in his role as president of Cogent and will report to Meserve. "We are very excited to be joining the ConvergEx team," Hodgkins said in a statement. "Together, we believe our technologies will set the standard for commission management solutions."
In May, a consortium of "global broker-dealers" signed a non-binding letter of intent to take a majority stake in Cogent in order to offer institutions commission management services through a common portal. The deal, scheduled to be completed this summer, fell through in June.
The commission management business involves the process institutions use to determine their broker lists, as well as pay for their executions and research. Commission management products help institutions manage their trading and research commission accounts with the firms that provide execution and research services. They also help institutions manage how they add or subtract brokers to their list of trading partners.
ConvergEx sees 1,000 institutions as its potential market, Meserve said. And that pool would grow, he added, if hedge funds were forced to institutionalize and register.
The deal is expected to close on or before Nov. 2, according to ConvergEx. Firms did not disclose the terms of the transaction.
