ConvergEx To Acquire Cogent Consulting After Collapse of Consortium Deal
John Meserve, Executive Managing Director, ConvergEx
“Cogent was a natural fit for us,” said John Meserve, executive managing director of ConvergEx, which is part of the BNY ConvergEx Group. “For us it extends our offer starting at the broker vote and ending with the (research) payments and everything in between,” said Meserve. “It was a no-brainer that this came together,” added Meserve.
The sale of Cogent to ConvergEx follows the collapse of an earlier deal to sell the software company to a consortium of global broker dealers. In May of 2009, following the credit crisis when CSA balances were frozen with the Lehman Brothers bankruptcy, Cogent said the brokers were buying a majority stake in the company. The brokers were potentially going to use Cogent's broker-neutral portal to virtually aggregate commission balances held at multiple brokers. But the parties were unable to reach agreement over the details of the transaction and negotiations were terminated in July.
Now Cogent’s assets will be sold to ConvergEx, a major global agency broker that has historically focused on soft dollars but that has been rebranded into commission management where commissions are pooled to pay for any eligible third-party services. Meserve maintains the acquisition addresses a lot of the issues that the industry is trying to tackle — compliance, best practices around client commission arrangements and value of research,” said Meserve.
In the interview, Robin Hodgkins, Cogent’s founder, president and CEO said, “The discussions with ConvergEx started after the consortium wound down.” Both companies realized their “solutions were not competitive and were very synergistic with each other and filled needs in each other’s marketplace, that would be difficult for each of us to do on our own,” said Hodgkins. ”We’re not a broker-dealer, so we can’t make payments on behalf of our clients,” explained Hodgkins, adding that Cogent’s research evaluation tool fit in well with ConvergEx’s commission management business.
Today, buy-side clients use ConvergEx to make payments to third-party research providers. A client will instruct ConvergEx to make a payment to brokers offering commission sharing arrangements (CSAs) or client commission agreements (CCAs) in the U.K. “We didn’t have any functionality today without Cogent that will help our clients value the research,” said Meserve. Says Hodgkins: “The fit starts at the valuation piece. Right now, ConvergEx pays research bills based on what a buy-side firm says they should be paid, he explains. Cogent goes upstream and helps buy-side firms quantify how much they should be paying for all the research,” says Hodgkins.
By acquiring the technology from Cogent, ConvergEx will be in a position to mange the entire commission pool, manage the CSA arrangements and handle the broker vote, says Meserve. “There isn’t a part of the equation that the institutional management needs, that we can’t handle with this arrangement,” said Meserve.
According to Hodgkins, the buy-side has been looking for more comprehensive solutions to get out of the payment business and the software business. “They want to address more rigorously their reporting needs of clients, brokers, compliance groups, and together we answer all those questions,” said Hodgins, adding, “It’s a one-stop shop.”
When asked if ConvergEx’s acquisition of Cogent’s assets is accomplishing what the consortium set out to do, Meserve said, “There’s a need for an independent provider. It’s unclear what the consortium may contemplate,” answered Meserve. “We think our combined solutions addresses what they were contemplating,” he added.
Cogent will remain where it is now and operate as an independent entity under Hodgkins’ management in Summit, New Jersey, where the team is based. Hodgkins will serve as president.
Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio
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