TP Icap agrees terms for acquisition of Liquidnet

Source: TP Icap

Following the announcement made on 29 September 2020, TP ICAP plc ("TP ICAP" or the "Company" and together with its subsidiaries, the "Group") confirms that it has agreed definitive terms to acquire the entire issued share capital of Liquidnet Holdings, Inc. ("Liquidnet" and, together with its subsidiaries and the Group, the "Enlarged Group") for a total consideration of between US$575 million and US$700 million, comprising cash consideration of US$525 million (subject to customary adjustments) payable on completion of the Acquisition ("Completion"), non-contingent deferred consideration of US$50 million and contingent consideration of up to US$125 million (the "Acquisition").

The Acquisition is expected to complete in Q1 2021.

The Acquisition creates a UK-headquartered, global financial markets infrastructure provider. The Enlarged Group will be well-positioned to benefit from powerful market structure trends related to buyside objectives, such as achieving trade process efficiency and best execution, which are propelling the rapid electronification of financial market trading across multiple asset classes and, in particular, in the dealer-to-client ("D2C") segments of the Credit and Rates markets.

Commenting on the Acquisition, Nicolas Breteau, CEO, TP ICAP, said:

"Acquiring Liquidnet is a unique opportunity to transform TP ICAP's growth prospects by materially accelerating the execution of our electronification, aggregation and diversification strategy.

Liquidnet is a premier, technology-driven, global electronic trading network with more than 1,000 buyside clients1. It has a strong and trusted brand, which we will both retain and develop. We will continue to invest in, and grow, Liquidnet's leading dark/block Equities business, and maintain its position as a trusted and unconflicted agency broker.

Liquidnet's electronic network incorporates extensive buyside trade workflow connectivity, including integrations with all major order management and execution management systems. We intend to build on Liquidnet's capabilities and connectivity, and expand its offering, particularly in respect of D2C electronic trading in Credit and Rates. Further, we expect to leverage the data assets and analytics expertise of both organisations to drive non-transaction-related earnings.

We believe that TP ICAP's strong dealer relationships and product expertise are highly complementary to Liquidnet's electronic capabilities and global buyside customer base. In addition, its global low-touch block cash Equities franchise complements our existing high-touch derivatives and cash Equities activities. Combined, TP ICAP and Liquidnet will be able to offer our clients compelling electronic trading and analytics solutions, driving sustained growth and shareholder value creation over the medium and long-term."

Commenting on the Acquisition, Brian Conroy, CEO, Liquidnet, said:

"We are energised by the opportunity of combining the strengths of TP ICAP and Liquidnet. This transaction underscores the relevance and future prospects of a business we started two decades ago, and which has grown to become not only a leader in global institutional equities block trading, but also one of the world's premier buyside-focused electronic networks.

Together, we will be able to better serve our customers, whilst simultaneously delivering innovative market solutions to a broader range of institutions, across a wider range of asset classes and market segments. TP ICAP's customer base, unique data assets and global leadership across a range of product markets are highly complementary to Liquidnet and are expected to enable the acceleration of our growth plans across Equities, Fixed Income and Investment Analytics."

Strategic highlights

The Acquisition accelerates delivery of the three pillars of TP ICAP's strategy - electronification, aggregation and diversification, and is expected to transform TP ICAP's earnings profile and growth trajectory. The Enlarged Group's earnings mix will progressively reflect the contribution from higher growth and higher margin businesses, including electronic D2C Credit and Rates trading and Data & Analytics.

Importantly, the Acquisition:

· Provides TP ICAP with substantial electronic trading and workflow connectivity to the buyside. Liquidnet's global integrated buyside network ranks amongst the largest electronic trading communities in the world, comprising over 1,000 institutional asset management clients1, and it integrates with all major order/execution management systems. In addition to delivering substantial customer base diversification, the Liquidnet platform represents a rare foundation upon which to build.

· Diversifies TP ICAP's asset class exposure. Liquidnet's low-touch buyside-focused cash Equities model delivers expertise across block (or dark) and lit markets and is complementary to TP ICAP's existing high touch inter-dealer oriented Equities activity, and the Enlarged Group intends to continue to invest in strengthening and growing the Liquidnet business.

· Offers a number of immediately addressable, and sizeable, opportunities, including:

o Expansion of Liquidnet's electronic Credit trading offering to the D2C segment of the market, where sizeable competitor platforms serving a rapidly growing marketplace are currently few in number; and

o The introduction of a D2C electronic trading offering for the Rates market - the largest asset class by volume in the world - which is currently predominantly served by a limited number of large platforms offering D2C trading protocols.

· Accelerates the growth and development of both Liquidnet and TP ICAP's data and analytics offerings by leveraging the Enlarged Group's rich data sets, product and analytical expertise, customer relationships and distribution capabilities.

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