Barely a few months after Canadian giant TD Bank acquired investment bank Cowen for US$1.3bn, the word is that its prime brokerage division could be looking to divest from its parent due to what people with knowledge of the issue are calling a serious culture clash.
Led by joint heads Michael Rosen and Jack Seibald, TD Cowen’s prime brokerage unit has always had an independent and strongly entrepreneurial spirit – and within Cowen, was left largely to its own devices. However, there are suggestions that the division is now chafing under its new leadership – and could be looking for a new home.
First reported by Hedge Fund Alert (HFA) on 25 May, the rumour is as yet unconfirmed – and TD Cowen were not available to comment when contacted by Best Execution. However, according to sources familiar with the matter, the division’s co-chiefs are in talks with several banks regarding a potential sale.
The prime brokerage division within TD Cowen – which includes its outsourced trading function – is believed to comprise around 150 people, including a section of TD Cowen’s post-trade arm, which totals around 200 (not all of which are tied to the prime brokerage) and sits in Ireland. The value of the division, and what it might sell for, is hard to gauge, but according to HFA the prime brokerage business generated over US$100 million in revenue for the bank last year. In total, according to SEC filings, the broader Cowen (now TD Cowen) brokerage business (which includes other segments such as electronic execution as well as prime) brought in US$592 million for 2022, almost 40% of the bank’s total – during a year when investment banking revenues across the board plummeted as deals dried up and the economic climate contracted.
The prime brokerage business was originally founded by Rosen and Seibald as Concept Capital, a prime broker they sold to Cowen in 2015. The co-founders retained substantial control over the division, which is believed to be a key factor in their decision to seek an alternative parent.
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