GAIN Capital/FXCM Merger Update (Post Conference Call Edition)

If you are going to buy out another company, make sure to use the words accretive. That was the story during FXCM’s conference call where they discussed their proposed acquisition for Gain Capital. Following the call, and with US markets open, shares of FXCM have managed to buck the typical acquirer related decline and are slightly higher to $13.61 (1.6% gain). The move in FXCM’s shares is helping Gain Capital stock as it is currently trading over 26% higher to $5.43, above the $5.35 offer. With Gain's shares opening at the $5.35 offer level, it could also suggest that traders are expecting a sweetened bid to occur.

During the call, much of the information provided from FXCM was similar to what had been posted in their previous press release and presentation slides that we posted about earlier. Among important new information:

FXCM is planning to migrate Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term.com customers to their platforms. Responding to questions on whether they will be able to retain customers despite the migration, FXCM CEO Drew Niv answered that they expect clients to stay with them, and have had success in this regard in previous mergers.

It’s believed that FXCM has had previous discussion with Gain. When questioned about this, Niv refused to provide any details, but it was understood between the lines that their current move of going directly to shareholders means they were initially rebuffed by management. (Forex Magnate’s opinion is that there could be shareholders within Gain that have decided they are willing to ‘throw in the towel’ and are supportive of an exit, even if it comes well below the IPO price)

In terms of cost savings, FXCM mentioned decreasing head cut, and removing operational redundancies such as multiple Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term licensing and headquarter space.

In terms of competition, according to Niv, the idea of ‘taking out Forex.com’ he didn’t believe it will decrease the competitive environment.

Despite the great start to 2013, Nic stated that FXCM isn’t counting on organic growth and their focus is on synergies and operation efficiencies. This view follows earlier comments that he had made at the Forex Magnates M&A Panel.

One area that wasn’t touched was what will happen to Gain’s GTX and OEC units and whether they will be integrated within FXCM’s current operations. As soon as we have more details we’ll provide an update.