TP ICAP has finalised the acquisition of Liquidnet, which will enable the interdealer broker to tap into significant growth in dealer-to-client rates and credit trading.
Although a price tag was not mentioned, estimates are that the deal is valued at between $575m and $700 m. TP ICAP recently raised £315m through a rights issue to finance the transaction.
The company said that the acquisition will create a diversified global markets infrastructure and data solutions provider. The enlarged group is expected to benefit from market structure trends including increased electronic trading on the back of buyside firms looking to achieve greater trade process efficiency and best execution.
The purchase will provide TP ICAP with access to Liquidnet's network of more than 1,000 asset management and hedge fund clients, who collectively manage $33 trn in equity and fixed income assets across 45 global markets.
According to analysts from Peel Hunt, the purchase will allow TP ICAP to progress its objectives of electronification and diversification in one step. They expect that the deal will contribute to overall performance starting in 2022 and 2023, as it begins to deliver strong revenue growth and operating margin expansion.
The analysts noted that it will take time for the benefits to be realised in earnings forecasts, but TP ICAP will now have exposure into a part of the market which attracts significantly higher earnings multiples,
“Completing the acquisition of Liquidnet is an important milestone for TP ICAP,” said Nicolas Breteau, chief executive at TP ICAP. “Bringing together two highly complementary businesses transforms our growth prospects by materially accelerating the execution of our strategy.”
He added, “Our focus now is on the swift integration of Liquidnet and realising the compelling opportunities to drive higher revenues and returns to shareholders.”
The London-based interdealer broker reported a 2,2% drop in revenue to £ 1.79 bn, in 2020 which was slightly down from the broker's guidance in January that 2020 revenue as a whole would be 1% lower. It attributed the decline to subdued trading volumes in the fourth quarter.