New York-based ConvergEx, a financial industry software company, is an affiliate of Bank of New York Mellon Corp. It has tapped Goldman Sachs to run the process, sources say. The ConvergEx auction is in the early stages, one banker says, and “every large sponsor” is looking at it.
“Goldman is out shopping [ConvergEx] right now as a dual track process,” the banking source says.
ConvergEx could sell for 7-10x LTM EBITDA (last 12 months), another banker says. However, it is not clear if ConvergEx will find a buyer since the company has “been softly for sale for a while,” the second source said.
Last week, ConvergEx revealed plans to go public in an IPO that could raise as much as $400 million. Goldman is among the underwriters on the deal but is not the bookrunner. J.P. Morgan apparently has that role, according to a May 5 SEC filing. Citi and Barclays Capital are also underwriters on the deal, the filing said. ConvergEx said it plans to trade under the ticker “CVGX.” The company did not disclose the number of shares it would offer or on what exchange it would trade.
Dual track M&A strategies–when companies start the IPO process at the same time that they go up for sale– are relatively common. For example, Skype filed to go public last August but agreed this week to sell itself to Microsoft for $8.5 billion.
ConvergEx was formed in October 2006 when Eze Castle Software combined with BNY Mellon’s institutional businesses. GTCR also invested at the time. BNY Mellon and GTCR each currently own 33.2% in ConvergEx. Management and directors hold the remainder of the minority stake, the filing said.
Since its founding, ConvergEx has completed several acquisitions. It bought LiquidPoint in 2007 for $200 million. In 2009, ConvergEx spent $62.2 million on three deals: Cogent Consulting, NorthPoint Trading Partners and Millennium ATS, a unit of NYFIX. Another two acquisitions–RealTick EMS and LDB Consulting–occurred last December with a purchase price of $87.8 million, according to the filing.
Last year, ConvergEx reported that revenues grew by 2.7% to $531.5 million, although the company posted a $22.3 million loss for the year. Adjusted 2010 EBITDA was $162 million. The company is highly levered with $713.7 million in long-term debt as of Dec. 31. ConvergEx employs about 1,200 employees globally with most located in the U.S.
Officials for BNY Mellon, Goldman and ConvergEx declined comment.