Cogent Consulting, a US-based provider of commission management systems, has broken off negotiations about being acquired by a consortium of six global broker-dealers.
The brokers signed a non-binding letter of intent to buy Cogent in May, but CEO and founder Robin Hodgkins told theTRADEnews.com that the firm’s foreseeable future would be independent.
“Discussions were very positive throughout. But in the end we could not agree terms and decided that it was in everybody’s best interests to get back to our day jobs,” said Hodgkins.
He denied that differences of opinion on Cogent’s valuation had caused the breakdown. “The termination was reflective of the fact that the process involved a lot of large firms that held a number of different views,” said Hodgkins.
The brokers, which had been under pressure collectively to reform their commission-sharing services after the collapse of investment bank Lehman Brothers last September left many asset managers and research brokers in limbo, had intended to use the Cogent purchase to create an industry-wide platform that would reduce risks and increase transparency. Since late last year, CSA brokers have faced increasing calls to ringfence their commission-sharing and management services to prevent a repeat of the post-Lehman freezing of some commission payments.
One of Cogent’s existing products, CSA Trak, manages commission-sharing agreements (CSAs) through a single online portal that reports balances and activities both by broker-dealer and on a virtually aggregated basis.
Hodgkins was bullish on Cogent’s prospects as a standalone entity. “Buy-side firms are looking to protect their balances by paying them down more frequently and widening their number of CSA brokers, while mid-tier brokers are responding to this increased client demand. As a result, our prospect list has never been stronger and nor has the need for multi-client, multi-broker, multi-vendor and multi-currency functionality,” he said. “Cogent plans to continue its programme of leveraging its technology to assist institutional investors, hedge funds, and the brokerage community in all aspects of valuing and paying for proprietary and independent research.”
The firm, founded by Hodgkins 26 years ago, also provides trade reconciliation services and a broker voting platform.