Private Equity Firms Replace Lehman’s with Minority Stake in BATS

Two specialist equity firms have bought a minority stake in BATS Global Markets, (BATS), the world’s third largest Equities Exchange . Spectrum Equity, a leading growth equity firm focused on the information economy, and TA Associates, a leading global growth private equity firm, made the announcement that they have each acquired a minority stake in BATS.

BATS has been operating in the US since 2005, BATS which is an abbreviate for ‘Better Alternative Trading System’ was initially formed as an ECN to compete with the NYSE & NASDAQ stock exchanges. Over the last eight years, the alternative trading venue has gone from strength to strength and now is an arch rival to the major equities executing venues in both the US and Europe.

CEO of BATS Global Markets Joe Ratterman, spoke about the investment in a comment to the media, said "We're pleased to welcome Spectrum and TA as members of the BATS investment group and look forward to working with them as we continue to play our part to make markets better. We also thank Lehman for their longtime support of BATS and our markets."

Exact details of the investment have not been published, however according to previous regulatory data filed by BATS, Lehman held a 12.3% stake. The current investment is believed to be around the 12% with Spectrum and TA Associates taking equal share.

"BATS has established itself as an innovative firm committed to enhancing market efficiency and leveling the playing field for all investors," said Chris Mitchell, Managing Director at Spectrum Equity in a statement, who will serve as a director on the BATS Board in connection with the transaction. "We look forward to supporting this talented management team in driving BATS' continued growth and continuing to foster advances in markets worldwide."

"BATS has consistently delivered best-in-class solutions for the United States' cash equities and equity options markets and the pan-European cash equities market," said Ken Schiciano, a Managing Director at TA Associates in the press briefing. "BATS' talented management team and proprietary high-performance technology have enabled the company to maintain its market share and position the company for future growth. Given TA's successful history of investing in the financial technology sector, we are looking forward to partnering with the BATS management team."

BATS was established by High Frequency trading shop, Tradebot Systems, in a bid to break up NYSE and NASDAQ’s command on the US equities market. Currently the alternative trading venue boasts 10 to 12% market share. BATS was planning to go for IPO last year, however after a major computer glitch, the firm decided to halt its intention to go to market.

Both Spectrum and TA Associates’ portfolio exceeds the billion dollar mark, the inclusion of highly valued players in the private equity space could be a sign of BATS Global Market re-entry in the IPO market.