Legent Clearing about to be bought?

Speculation rampant that clearing firm will be acquired by PE outfit

Jun 2, 2011 @ 3:56 pm

By Jessica Toonkel

Rumors are swirling that Legent Clearing LLC is about to be bought by private-equity investors — just months after a previous attempt to buy the firm failed.

In June 2010, United Western Bancorp Inc. said that its subsidiary United Western Bank was buying Legent for $13 million. But in January, the Federal Deposit Insurance Co. closed the $2 billion bank after a long struggle by the bank to raise capital.

Now, speculation that Legent has a buyer has some of the clearing firm's customers worried.

“What makes me uneasy is that every couple of months, there are a new set of firms trying to buy them,” said one broker, who had heard about the potential acquisition and asked not to be identified. “It makes it hard for us to recruit.”

Dave Jarvis, general counsel for Legent, declined to comment about a possible sale, beyond saying: “We are a private company, and if we have an announcement to make, we will.”

InvestmentNews has been unable to identity the potential buyer. Still, if the rumors are true and the private-equity firm is financially strong, an acquisition would be good news for Legent and its customers, said Alex Montano, managing director of the corporate finance group at C.K. Cooper and Co., an investment bank that uses Legent.

“The last buyer didn't exactly give me a warm and fuzzy feeling,” Mr. Montano said.

According to InvestmentNews data, Legent ranked as the 14th largest clearing firm in the industry (See full chart here), with 80 broker-dealer clients.

Four of those clients were, National Securities Corp., First Midwest Securities Inc., vFinance Investments Inc., MidAmerica Financial Services Inc., according to the April InvestmentNews independent broker-dealer survey. (View that chart here.)

Given Legent's small size, it isn't surprising that the firm once again would be a target, said Peter Hoffmann, chief financial officer at Perrin Holden & Davenport Capital Corp., a firm that has used Legent for 15 years.

“They are a small clearing firm, so you either get bought or you have to buy,” said Mr. Hoffmann, who said he hadn't heard the latest speculation. “If this rumor is true, it should be good for us because it means [Legent] won't go belly up.”

But Mr. Jarvis dismissed concerns about Legent's financial situation, saying that because the clearing firm is small, it doesn't have to pay the kinds of infrastructure costs that some of its competitors do.

“I don't think for a minute that we have a need to transact in anything,” he said.


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