New Jersey-based Knight Capital Group has signed an agreement to acquire privately-held trade execution outfit EdgeTrade in a cash and stock deal worth around $59.5 million.
Under the deal Knight Capital will pay $29.5 million in cash and 2.3 million shares for New York-based EdgeTrade, which was established in 1996 and provides buy- and sell-side firms with agency-only trade execution services and algorithms. The firm currently employs some 43 staff.
Knight says the deal combines EdgeTrade's client order-driven algorithms with its trade execution services and will strengthen its offering at a time when, according to industry analysts, approximately 94% of buy-side firms report they are using equity algorithms, up from 77% in 2006.
"As algorithmic trading increases in a fragmented market environment, the acquisition of EdgeTrade will enhance our trade execution services and provides us with a significant advantage as demand continues to grow for sophisticated, next generation algorithms," says Knight Capital chairman and CEO, Thomas Joyce. "Beyond the immediate opportunity to cross-sell EdgeTrade's algorithms to clients through Knight Direct, our direct market access platform, we anticipate demand for new algorithms that cover international equities as well as additional asset classes such as foreign exchange and options."
The acquisition is expected to be completed in the first quarter of 2008. Knight Capital says it expects that the transaction will be slightly dilutive in 2008 and accretive in 2009.