Private equity firm Silver Lake Partners is looking to sell its electronic broker Instinet less than a year after buying it. The California technology fund began seeking competitive bids after receiving an unsolicited offer for the broker. It is also considering floating the business.
Silver Lake, which bought Instinet last December as part of a three-way deal with Nasdaq, is its majority owner while management, led by chief executive Ed Nicoll, retains a stake. A source close to Instinet, which serves 1,500 institutional clients in 55 equity markets, said the broker was approached by a potential buyer. This prompted Instinet to test the market and appoint Evercore Partners, the US advisory boutique that floated this month, to circulate a memorandum of information to potentially interested parties. Instinet, Silver Lake and Evercore declined to comment. The memorandum details Instinet's financial performance but does not include a price, requesting competitive bids instead, said another source at an investment group that specialises in financial industry deals. The source also said Instinet's management is meeting investment bankers in New York today to explore the possibility of an initial public offering. It is not unusual for a company that wants to ascertain its value to simultaneously seek a single buyer and try to estimate its price for an initial public offering. The process, known as "dual tracking," is used in particular by companies such as Instinet that are experiencing growth above their own projections. Since its acquisition by Silver Lake, the institutional broker has revamped its trading system entirely and witnessed a surge in global demand for its services. In last December's deal Nasdaq, which wanted to acquire Inet, an electronic trading platform, paid $935m (€726m) for the parent Instinet group. The Bank of New York paid $174m for commission recapture subsidiary Lynch, Jones & Ryan, and Silver Lake bought Instinet for $208m. This was not the first time Silver Lake had invested in Inet. In 2000, the group teamed up with Bain Capital and TA Associates to take a majority interest in Datek Online Holdings and its Island electronic crossing network, Inet's former incarnation, for $700m. The investors sold Datek to online broker Ameritrade for $1.3bn in 2002 and, three months later, sold Island to its rival Instinet for $508m. Instinet was majority-owned by Reuters at the time. An agency broker with no proprietary trading operations, Instinet was created in 1969, predating Nasdaq by two years as an electronic market.
