The Bank of New York (BNY), order management application provider Eze Castle Software and private equity house GTCR Golder Raunerhave formed a new company that unites BNY Securities Group’s trade execution, commission management, independent research and transition management businesses with the order management applications owned by Eze Castle Software. The new firm, to be called BNY ConvergEx Group, will be established by the end of September, pending regulatory approval.
BNY says the aim of the new company is to create a global agency brokerage and technology company offering a complete range of pre-trade, trade, and post-trade services to traditional fund managers, hedge funds, broker-dealers, corporations and pension plan sponsors. In a statement, BNY said: “The company’s comprehensive suite of services, advanced technology offerings and breadth of distribution channels will enable its customers to manage all aspects of the trade life-cycle, including idea generation, research, analysis, trading and execution, clearing and settlement, risk management, compliance and portfolio management. It will also have a strong capital base to support its future growth.”
The Bank of New York and GTCR Golder Rauner will each hold a 35.4 percent stake in the new company, with the balance held by Eze Castle Software’s investors and BNY ConvergEx Group’s management team.
The new company, with proforma 2005 revenues of approximately $340 million, will be an affiliate of the Bank of New York and its assets and performance will be reflected in the company’s financial statements as an equity investment. The transaction is not expected to result in any net gain or loss for the Bank of New York and is expected to be neutral to earnings.
In addition to Eze Castle Software, the BNY Securities Group businesses to be included in BNY ConvergEx Group will be BNY Brokerage, Lynch, Jones & Ryan, G-Port, Westminster Research and BNY Jaywalk. Each business will retain its respective brand name and continue to operate as it does today, while hopefully taking advantage of the combined capabilities of BNY CovergEx Group.
In addition, the Bank of New York’s B-Trade and G-Trade businesses are expected to become part of BNY ConvergEx Group in 2008, although in the interim they will continue to be owned by the Bank of New York. The Bank of New York Company’s Pershing subsidiary, a leading global provider of clearing and financial services outsourcing, is not included in the transaction.
“The formation of BNY ConvergEx Group creates a new, more powerful organization that combines our current capabilities with one of the leading trade order management providers, backed by a leading private equity firm,” says Thomas A. Renyi, chairman and chief executive officer of the Bank of New York. “By establishing BNY ConvergEx Group, we will be well positioned to accelerate the capital investments needed for expanding the products and services that will allow us to win and grow in a rapidly changing marketplace. As an affiliate, BNY ConvergEx Group will continue to be an integral part of The Bank of New York’s offerings, providing a broader array of agency brokerage, order management and global transition management solutions to our institutional clients worldwide. In addition, the new firm will represent an attractive equity investment for us.”
Bank of New York says the BNY ConvergEx Group brand name was chosen to reflect the convergence of technologies required to provide open solutions that span the investment cycle. Approximately 635 employees from BNY Securities Group and Eze Castle Software will become part of BNY ConvergEx Group. BNY ConvergEx Group will have a presence in New York, Boston, San Francisco, Chicago, Dallas, Stamford, London, Bermuda, Tokyo, Hong Kong, and Sydney.
“The dynamic, ongoing evolution of the financial marketplace has created the need for flexible, innovative technology solutions providers,” says Joseph M. Velli, senior executive vice president of the Bank of New York and the future chairman and chief executive officer of BNY ConvergEx Group. “BNY ConvergEx Group will provide integrated trade execution, independent research, commission management and trade order management services. This will be an entrepreneurial organization that will move quickly to enhance and expand our product offerings, leveraging our collective experience and market leadership to create superior growth. Additionally, as an affiliate of the Bank, BNY ConvergEx Group will enable The Bank of New York to strengthen its technologies and service offerings to its core client base.”
“I am very excited that Eze Castle Software will become part of a new, leading-edge business model that will combine the power of technology with the execution and research capabilities of BNY Securities Group,” says Sean McLaughlin, founder and chairman of Eze Castle Software. “Many of our clients have been demanding better integration across the investment and trading workflow. BNY ConvergEx Group will be uniquely positioned to deliver the solutions that clients require.”
“Our team at Eze Castle Software is pleased to be joining with BNY Securities Group to harness the combined power of our two firms,” adds Thomas P. Gavin, chief executive officer of Eze Castle Software. “Our industry-leading trade order management capabilities have helped investment management firms worldwide to automate their investment processes, and we look forward to providing an even broader suite of investment technology solutions as part of BNY ConvergEx Group.”