According to sources familiar with the matter, the pair have communicated to clients that they have jointly concluded it would be in the best interests of clients if the prime brokerage and outsourced trading business were divested to a partner more “strategically and geographically aligned” to the platform.

TD Bank Group and TD Cowen declined to comment. 

TD Bank Group completed its $1.3 billion Cowen acquisition in March. At the time, the bank said the acquisition would create an integrated North American dealer that would significantly advance its growth strategy in the region through the addition of Cowen’s US equities sales trading, and execution, as well as research capabilities.

Cowen Digital

The news follows an internal memo from TD Cowen earlier this week confirming that it would be shuttering its digital assets unit, Cowen Digital, two years after its launch.

The communication, seen by The TRADE, was signed off by 11 team members, including managing directors Drew Forman, head of Cowen Digital; Eric Rose, head of execution; and Keith Coyne head of product and strategy.

The memo reemphasised the importance of “trusted counterparties who understand the needs of institutional investors” and expresses the unit’s need to operate from “a different home” going forward.

The latest move appears to confirm the broadly recognised challenge of merging bank and brokerage cultures.

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The note mentions that the inception of the unit came back in 2021, however the launch was made public in March 2022.

The platform offered institutions access to the digital asset ecosystem using trade execution and custody solutions and was launched in response rising demand for cryptocurrencies.

While the note did not cite the crypto winter as a reason, the environment has certainly taken its toll on the institutional digital asset space as a whole.

The communication was signed off by 11 team members, including managing directors Drew Forman, head of Cowen Digital; Eric Rose, head of execution; and Keith Coyne head of product and strategy.

The memo reemphasised the importance of “trusted counterparties who understand the needs of institutional investors” and expresses the unit’s need to operate from “a different home” going forward.

The decision comes just months after TD Bank Group completed its all-cash $1.3 billion acquisition of Cowen, following an initial announcement in August 2022. With the deal, TD added new capabilities in US equities to its remit.

Last year, TD was involved in a string of deals as it aimed to expand its operations into the US, which was understood to be partly linked to strict regulations regarding domestic mergers in Canada. Its bid to buy Tennessee-based First Horizon Bank was reported to have been put on ice just this month.

The post TD Cowen shuts digital asset unit two years after inception appeared first on The TRADE.

The bank said the acquisition will create an integrated North American dealer that will significantly advance its growth strategy in the region through the addition of Cowen’s US equities sales trading, and execution, as well as research capabilities.

Originally announced in August last year, the all-cash transaction is valued at $1.3 billion. The combined firms’ pro-forma global revenues are expected to increase by more than a third to around $6.8 billion across advisory, capital markets, equity execution and research.

The pair confirmed on 24 February that they had received the regulatory approvals required under their merger agreement to complete the deal.

Cowen will now be known as TD Cowen. Once the transaction closes Jeffrey Solomon, current chair and chief executive officer of Cowen, will join the senior leadership of TD Securities, reporting to Riaz Ahmed, president and chief executive officer at TD Securities and group head of wholesale banking, TD Bank Group.

The post TD completes $1.3 billion Cowen acquisition to advance US investment banking growth strategy appeared first on The TRADE.

The acquisition will see Cowen integrated into the group’s investment banking arm, TD Securities, as a new division called TD Cowen. It will be headed up by Cowen chairman and CEO Jeffrey Solomon, reporting to TD Securities president and CEO (and group head of wholesale banking) Riaz Ahmed. Cowen’s 1,700 employees will bring the combined entity up to a 6,500 headcount, across 40 cities.

“Cowen is a leading independent dealer with a premier US equities business and a strong, diversified investment bank that, when combined with TD Securities, will allow us to accelerate our strategic US growth plans,” said Bharat Masrani, group president and CEO of TD Bank Group.

“Most importantly, the acquisition will provide new capabilities and increased depth in key business lines to meet our clients’ needs and will allow us to leverage our combined expertise, talent, and integrated offerings across a much larger client base.”

The deal is expected to boost the new entity’s combined revenues by more than a third, to an estimated C$6.8 billion, as well as adding advisory, capital markets, equity execution and research capabilities to the TD toolchest. The research element is of particular value – Cowen is currently ranked in the top 10 research platforms in the US.

Expected to close in the first quarter of 2023, the agreement values Cowen at $39 per share and represents 1.7 times current book value as of Q1 2022. It is expected to incur integration costs of $450 million over three years, offset by expected revenue synergies of around $300-350 million. TD sold $1.9 billion-worth of its stake in The Charles Schwab Corporation to fund the transaction, reducing its holding from 13.4% to 12%.

The acquisition fills a gap in TD’s armoury, where it hopes to build out its capital markets business to better compete with RBC. Currently, wholesale banking revenues account for around 11% of TD’s total business, half that of RBC’s wholesale contribution. Cowen could be the ideal catalyst to boost these numbers – formerly a division of Societe Generale, the bank has been on a growth trajectory since its spin-off and public listing in 2006, delivering a 38% profit last year driven by investment banking and brokerage revenues.

“At Cowen our success comes from striving to outperform in all we do by exceeding expectations and providing innovative solutions to, and partnering with, our clients. Taking this step will make us even stronger and more effective in serving their growing needs,” said Solomon. “The strategic decisions and focused investments that we have made over the last few years have positioned Cowen for this exciting next chapter of our growth.”

The acquisition is the latest in a string of deals by TD to expand its operations into the US, driven partly by strict Canadian regulations that limit domestic mergers. Earlier this year, the bank entered into an agreement to buy Tennessee-based First Horizon Bank for $13.4 billion in a bid to break into the top six US retail banks, although doubts have since been raised as to whether the deal will close after US Senator Elizabeth Warren filed objections to the merger in June.

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