Lehman Brothers Acquires Townsend Analytics

Lehamn Brothers Looks to Bolster Electronic Trading Offering With Acquisition of Townsend Analytics

In a move to further bolster its electronic trading and execution management offering, Lehman Brothers has acquired Townsend Analytics, a Chicago-based software and service provider for the financial services industry. The deal includes Townsend's clients, its flagship RealTick execution management software and the developers various other trading technologies and services. Financial terms were not disclosed.

The acquisition is intended to improve Lehman Brothers' offering in electronic trading and research delivery for institutional, hedge fund, investment advisor, prime broker and clearing services clients. The firm will be able to more effectively serve clients wishing to outsource execution management processes, and expects the RealTick platform to shorten the time it takes for their analytics to reach the market, according to a Lehman statement.

"Not having a platform of our own has limited our ability to provide analytics in a timely manner," said Jeffrey Wecker, managing director and global head of Electronic Client Services, in an interview.

"It will allow Lehman Brothers to provide better electronic execution and management capabilities," explained Rob Hegarty, managing director, Securities and Investments Group at Needham, Mass.-based TowerGroup, in an interview. "We have seen this trend before -- where institutions go out and acquire technology vendor firms when they think the technology can add value to their business."

The relationship between the businesses will not be exclusive. Townsend Analytics will continue to operate as an independent subsidiary, maintaining its business with firms other than Lehman Brothers. There are no immediate plans for Townsend Analytics to begin in-house or dedicated development for Lehman Brothers, although the firm may take advantage of Towsend's resources in the future. "We absolutely are looking at extracting as much leverage for our in-house systems as is practical," said Wecker.

TowerGroup's Hegarty notes that vendor acquisition is quickly becoming a common strategy in the financial services industry and will become more popular as firms look to add value and separate themselves from the competition.

"This is a trend that has already begun...this acquisition by Lehman follows Citi's acquisition of Lava [Trading]. We see a similar pattern where institutions see unique vendors and they acquire them. [Financial services firms] have cash on hand and they believe they are buffeted by a strong economy, so we expect to see a lot of activity in this area," Hegarty says.