TP ICAP in Talks to Buy Dark Pool Operator Liquidnet

The deal values Liquidnet between $600 million and $700 million and includes a $550 million in upfront payment.

TP ICAP today confirmed plans to acquire private trading operator Liquidnet as the world’s largest interdealer broker continues with the ambitious growth plans outlined by its new management earlier this year.

The deal values Liquidnet between $600 million and $700 million and includes $550 million upfront payment alongside deferred non-contingent payment of $50 million and a further earn-out of up to $100 million that is dependent on the performance of the business following the acquisition.

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Liquidnet, which was reportedly seeking a $1 billion valuation, was founded by Seth Merrin in 1999. The New York company is known for operating dark pools that allow institutional investors to trade stocks anonymously.

Since launching in September 2015, Liquidnet’s community of fixed income asset managers has grown to 1,000 asset management and hedge fund clients, who collectively manage $33 trillion in equity and fixed income assets. This growth has been fueled by members’ ability to trade in institutional size with an average execution of $2.4 million.

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Additionally, Liquidnet has been expanding its portfolio by buying more AI and alternative data offerings. The first step was the acquisition of OTAS Technologies in 2017, followed by RSRCHXchange and Prattle in 2019.

The Liquidnet sale comes as the fixed income market is undergoing dramatic changes, as the applicability of electronic trading across the sector has been much slower than the equity and forex markets. In the best case scenario, it is still largely limited to the most liquid parts of the market.

Explaining the rationale behind the deal, ICAP said it believes there is clear potential to build further, complementing Liquidnet’s strengths and shared unconflicted agency-only model with its own product expertise, dealer relationships, and connectivity. Moreover, the company sees growth opportunities, arising from the combined strengths of Liquidnet and TP ICAP in several segments including credit products where Liquidnet has built a global network of more than 500 buy-side institutions.

TP ICAP expects to invest £25-30 million with Liquidnet in the 12-24 months post completion of the potential acquisition.

TP ICAP, which earns its bread from making markets in different asset classes, employs thousands of brokers that negotiate trades in markets, such as FX and commodities.

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