September 11, 2012

Institutional brokerage and technology firm ConvergEx is looking to sell the Eze Castle order management system and the RealTick execution management system, Traders Magazine reported , citing a source familiar with the matter.

The source said the divestitures could fetch ConvergEx as much as $1 billion.

From Traders Magazine:

"People are really interested in this," said one source. "There are a number of players taking a look, and Eze is the main attraction." Goldman Sachs is ConvergEx's investment banker, and sources said that a $1 billion price tag is what ConvergEx is looking for in a sale. Any transaction would give early investors a liquidity event, sources said, and allow them to cash out, if not entirely, at least partially.

Eze is said to be the "crown jewel" of ConvergEx. It has been the cornerstone of the firm since Eze Castle Software merged with the Bank of New York's brokerage division to form BNY ConvergEx Group. From the beginning, ConvergEx's goal has been to build a technology provider in the brokerage industry, making it less dependent upon commission business.

A person familiar with trading platform valuations told Traders that Eze and RealTick would fetch between $800 million and $1 billion. But the source also cautioned that it's unclear how much demand there would be for an EMS like RealTick given the trading slowdown, the magazine added.

Eze, on the other hand, is attractive because it has hundreds of hedge fund clients. Its EBITDA is estimated at between $65 and $68 million a year. Private equity firms are familiar with Eze, as many of them looked at investing in the company last year, said a source. As a result, that should cut down on the time it will take for a buyer to emerge. "Everyone is pretty much up to speed; they know who they are, what they do and what their numbers are," the source said.

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced ...