Cowen Group Announces Acquisition of Convergex

Apr 4 2017 | 6:25pm ET

Financial services company Cowen Group has agreed to acquire global brokerage and trading-related services provider Convergex Group for $116 million in cash and stock, creating one of the largest independent equities trading and execution platforms.

Selling shareholders include private equity company GTCR and Bank of New York Mellon, Cowen said in a statement. The move comes less than a week after Cowen disclosed that CEFC China Energy Company had agreed to acquire a 19.9% stake in the firm for $100 million as well as provide up to $175 million in debt financing. The Convergex transaction is not contingent on the CEFC deal, Cowen added.

The acquisition is is expected to close by the end of the second quarter and is subject to customary closing conditions and regulatory approvals. Total consideration at closing will be adjusted for a number of factors, including Convergex’s tangible book value at that time. 

The majority of the transaction is to be conducted through cash on Cowen’s balance sheet and excess cash from Convergex at closing, Cowen said, with the remainder consisting of Cowen common stock based on a 30-day trailing VWAP. 

Upon closing, the transaction will result in a firm with combined pro forma brokerage execution revenues of over $400 million in 2016, will solidify Cowen’s position in U.S. trading volume, and expand its reach to 108 countries around the globe, including China. Cowen expects the acquisition to be accretive to economic income per share and return on tangible common equity in 2018.

Morgan Stanley & Co. served as financial advisor and Willkie Farr & Gallagher served as legal advisor to Cowen, while Freeman & Co. and Kirkland & Ellis served as advisors to Convergex.

“We are thrilled by today’s announcement and welcome Convergex’s extremely talented team to Cowen,” said Jeffrey Solomon, president of Cowen, in the statement. “Together, our combined best-in-class global execution capabilities, along with Cowen’s high-quality research and corporate finance advisory services, will enable us to continue helping our clients to outperform in challenging markets.” 

“The addition of Convergex’s global platform will also establish meaningful scale for Cowen’s equities business by significantly bolstering our capabilities in prime services, commission management, algorithmic and electronic trading, as well as clearing services,” he continued. 

“This strategic transaction is an exciting opportunity for both our clients and our employees,” added Convergex CEO Eric Noll. “The ability to combine with a great research based firm like Cowen, which has complementary businesses with minimal client overlap, creates a tremendous opportunity for our people and our clients. By forging this combination with enhanced experience and expertise, our respective clients will now have access to a wider array of global offerings and innovative solutions.”

Headquartered in New York, Convergex is an agency-focused global brokerage and trading-related services provider serving 2,500 hedge funds, asset managers, broker-dealers, trusts and exchanges. Business units include equity sales and electronic trading, commission management, prime services and global clearing.

Founded in 1918 and also based in New York, Cowen Group is a diversified financial services firm providing alternative asset management, investment banking, research, sales and trading and prime brokerage services through Ramius, its $10.7 billion alternative investment segment, and Cowen and Company, its broker-dealer unit. 

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