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Shining Light on a Potential Liquidnet Sale

Block liquidity provider and technology firm Liquidnet is reportedly up for sale for an asking price of $1 billion.

A Liquidnet spokesperson declined to comment to Traders Magazine on a May 22 Bloomberg story reporting the firm was up for sale.

Spencer Mindlin, capital markets analyst at market consultancy Aite Group said that the market for deals in the institutional FinTech space has been very active and the Covid-19 pandemic will likely accelerate that trend. So, Liquidnet could see healthy interest.

“In 2005, Liquidnet was valued at $1.5 billion when it received its $250m investment from TCV And Summit. And back then, Liquidnet’s solution for block equity crossing was simple, yet elegant – and effective,” Mindlin began. “But since then, Liquidnet has evolved, as has the capital markets.”

“Equities has been under enormous fee pressures and players have been under enormous competition. But Liquidnet has expanded into asset classes and products way beyond its roots as a block crossing network for U.S. equities,” Mindlin said. “Its value proposition continues to stay rooted in their strong technology, talent and expertise, and very strong working relationships with customers. Customers still very much rely on Liquidnet for block trading.”

Spencer Mindlin,
Aite Group

But is that enough?

Mindlin thinks so. He told Traders Magazine he would be surprised if a buyer doesn’t pay up for the firm. He cited potential suitors such as State Street, Blackrock, ICE, CBOE, MarketAxess, SS&C, Virtu Financial, as all have been “very aggressive” over the past ten years and he could see Liquidnet fitting comfortably into their respective business models and plans.

“Liquidnet has an army of top-notch talent and its technology continues to fly above the fray,” he said. “The winners in this market will be those with the most scale and the ability to integrate and bundle up the institutional trade lifecycle across the front-to-back office. It just makes sense to tuck in Liquidnet’s suite of products and solutions at a larger player.”

Founded in 2001, Liquidnet was one of the first innovators in the capital markets technology space, and it drove direct and indirect trading costs lower. Mindlin said equities has led the way for electronic trading among the asset classes, and Liquidnet was and continues to be a leader for equity block trading.

“Still, the sale (or potential one) is a sign of the times. Over the past twenty years, hundreds, if not thousands of people have worked on competitor products and solutions to Liquidnet,” Mindlin said. “A Liquidnet sale (would be) an inflection point for the industry.”