EquiLend Holdings LLC, the securities lending platform owned by some of Wall Street’s biggest firms, including Goldman Sachs Group Inc and BlackRock Inc, is reportedly considering a sale following the resolution of a significant collusion lawsuit. According to sources familiar with the matter, the company has engaged investment bank Broadhaven Capital Partners to facilitate an auction process that is expected to attract interest from exchange operators, financial technology providers, and private equity firms. Notably, Euronext NV has expressed interest in EquiLend as a potential buyer.
EquiLend is reported to generate earnings before interest, taxes, depreciation, and amortization (EBITDA) exceeding $25 million over 12 months. It is estimated that EquiLend could fetch around $700 million in a sale, according to one of the sources.
The decision to explore a sale comes as a surprise, considering that EquiLend was established as a joint venture by a consortium of Wall Street firms, including Bank of America Corp, Morgan Stanley, UBS Group AG, and JPMorgan Chase & Co, two decades ago. The specific reasons behind this decision remain unclear.
EquiLend recently agreed to corporate governance restrictions as part of a settlement to resolve a lawsuit filed by several U.S. public pension funds. These funds accused EquiLend of facilitating market collusion by its owners. This settlement mandated changes in how EquiLend’s board operates and marked a significant development in the company’s history.
Founded in 2001, EquiLend serves as a central platform for trading products associated with securities lending. It also provides data, analytics, and compliance technology for the industry. The platform collaborates with approximately 190 financial firms worldwide and boasts a staff of over 330 people, as per information available on its website.
Notably, some of the Wall Street firms that own EquiLend, including Goldman Sachs, JPMorgan, Morgan Stanley, and UBS, reached a settlement last month amounting to $499 million to resolve the lawsuit. The lawsuit had accused these banks of conspiring to stifle competition in the stock lending market through their control over EquiLend’s board, resulting in excessive fees charged to investors. It’s essential to emphasize that, as part of the settlement, these banks did not admit to any wrongdoing.
The prospect of EquiLend going up for sale is likely to draw interest from various market players. Exchange operators, financial technology firms, and private equity investors may see this as an opportunity to enter or expand their presence in the securities lending and financial services sector.
Euronext’s reported interest in EquiLend underscores the potential strategic value the platform holds for exchange operators. Expanding their service offerings in securities lending and related financial products could enhance the diversification and profitability of exchange operators’ businesses.
In summary, EquiLend Holdings’ decision to explore a sale after settling a collusion lawsuit reflects the evolving dynamics in the financial industry. The company’s substantial EBITDA and established position in securities lending make it an attractive asset for potential buyers. While the motivations behind the sale remain unclear, it is a development worth watching, as it could lead to changes in ownership and strategies within the securities lending and financial services sector.