Olivetree Financial is currently at the centre of merger talks, the TRADE can exclusively reveal.

One of the interested parties is said to be New York-based financial services firm StoneX. It is unclear whether negotiations will result in a deal, and whether it will be a full buyout, merger or a potential joint venture. 
 
Olivetree recently conducted a strategic review of its operations in the US, resulting in a number of job losses, according to a source, who spoke on condition of anonymity as the matter is private.  
 
The broker is choosing to focus on European markets as this is where it sees more opportunity in the near term. It still employs a number of people in New York, the person added. 
 
An Olivetree spokesperson declined to comment. StoneX also declined to discuss the matter when contacted by The TRADE, beyond noting that the firm does not comment on “employee movement”.  

The number of independent brokerages in Europe has been falling in recent years following a wave of consolidation. TP ICAP, the world’s largest inter-dealer broker, acquired Louis Capital, an equities and fixed income specialist, in July 2020. In November of the same year, Makor Group announced that it had entered into a strategic alliance with rival Churchill Capital. 
 
A boom in deal-making has also seen firms adding headcount to teams that specialise in mergers and acquisitions. M&A in Europe reached a 14-year high in 2021 and deals involving European targets totalled $1.4 trillion, an increase of 46% over the previous year, according to data from Refinitiv. 
 
The surge in M&A activity worldwide has been fuelled in part by private equity funds and the growth of special purpose acquisition vehicles (SPACs), Refinitiv said. 
 
Olivetree recently added to its event driven team in London with two senior hires from BTIG, as reported by The TRADE. Greg Levett and David Abraham joined the broker in September 2021, while Tim Caulton also re-joined the firm in July. 
 
The firm also made a number of hires in the US around the same time, with the appointment of Richard Orlando and Robert Weibel, also event driven specialists. 
 
Event driven strategies seek to profit from corporate events, including merger and acquisitions, restructurings, and spin offs. 
 
StoneX, formerly known as INTL FCStone, describes itself as an institutional-grade financial services network. The company’s London-based subsidiary, StoneX Financial, joined the London Stock Exchange (LSE) and its pan-European multilateral trading facility (MTF), Turquoise, as a member in May of last year, in a move designed to expand its offering in cross-border equities and boost its cross-asset capabilities.  

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Event driven strategies seek to profit from corporate events, including mergers and acquisitions, restructurings and spin-offs. Recently, event driven desks have been adding headcount amid a boom in deal activity.

The UK market has seen M&A activity equal to ~2.5% of its market cap year-to-date, according to a Citi research note dated 23 July, and the bank expects this trend to accelerate. Top tier investment banks are working on the financing for a full pipeline of UK deals, according to one industry insider who spoke on condition of anonymity.

Olivetree Financial has also been adding headcount in the US. Last week the broker announced that it had hired Richard Orlando and Robert Weibel in event driven sales, and Paul Young as an event driven sector strategist.

Chief executive and founder of Olivetree, Daryn Kutner, said that “whilst M&A activity has been strong this year the great majority of deals have been friendly bids, relatively small and generally cash. We think the constitution of M&A will change as we move later into the cycle with bigger deals, hostile in nature and financed with both cash and shares”.

Cowen has also recently strengthened its global alternative equity strategies offering with the hiring of four people from Olivetree’s event driven team in London.

Tarquin Orchard, Sebastian Greensmith, Charlie Hawkesworth and Alastair Mankin all joined former boss Mark Kelly who was appointed global head of alternative equity strategies at the US firm in the summer. Kelly was formerly employed as Olivetree Financial’s European chief executive officer and global head of event driven for 11 years.

Morrison, Ultra Electronics, Avast, Meggitt and Sanne Group have all received takeover bids in recent weeks. Private equity firms have been active buyers of UK companies and leveraged buyout deals (LBOs) make up a large portion of recent M&A activity. The FTSE 250 index is seeing more M&A than the FTSE 100 as the nature of LBO deals limits deal size, Citi said, adding that the key driver of the recent surge in M&A is the carry trade as central banks have driven down the cost of borrowing.  
 
Informa, Entain, SSE, Redrow and Redde Northgate top the list of UK takeover targets for Louis Capital event driven analyst Ben Kelly. “UK companies trading on low multiples are seen by private equity investors as representing a great opportunity to put money to work. The UK COVID recovery appears to be continuing while a persistent low interest rate environment and inflation looming on the horizon means that the last thing private equity firms want to do is sit on cash,” Kelly said.

Canaccord Genuity’s Quest analysis shows that “there are 177 stocks with a market capitalisation below £1.5 billion that have an LBO free cash flow yield above 10% (nearly a quarter of the UK market). This is unprecedented and shows the true extent of the UK Plc undervaluation relative to global peers,’’ adding that “UK PLC valuations continue to be very attractive so we don’t expect the current trend to abate.’’

James Congdon, global co-head of Quest said in emailed comments that “UK valuations continue to look attractive following the equity market de-rating driven by Brexit. That fact plus low interest rates, QE, a growing UK economy again and a liberal position by the government and regulators on takeovers suggests the M&A will continue to be strong.’’

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