Tp Icap Group Plc · LSE:TCAP
Tp Icap — Merger or Acquisition (October 2020)
30 slides from Tp Icap's merger presentation, Oct 9, 2020
Slide 1: Proposed Acquisition of Liquidnet
Proposed Acquisition of Liquidnet Transformational Opportunity for TP ICAP 09 October 2020
Slide 2: Agenda
Agenda Transaction Overview Overview of Liquidnet Strategic Rationale Financial Impacts, Business Transition & Timelines Concluding Remarks Q&A Appendix 2
Slide 3: Transaction Overview
Transaction Overview
Slide 4: Acquisition Rationale
Acquisition Rationale Rapid Acceleration of Strategy and Upward Shift of Growth Profile 1 Transaction accelerates delivery of the three pillars of TP ICAP’s strategy ● Aggregation, Electronification, Diversification 2 Liquidnet boosts TP ICAP’s growth trajectory ● Liquidnet allows TP ICAP to build s
Slide 5: Transaction Overview: Transformational Opportunity for TP ICAP
Transaction Overview Transformational Opportunity for TP ICAP 1 Liquidnet is a premier brand, technology-driven, global electronic trading network ● Agency broker and venue operator; access to 45 markets worldwide ● More than 1,000 buyside clients1 globally managing ~$33trn1 in equities and fixed in
Slide 6: Overview of Liquidnet
Overview of Liquidnet
Slide 7: Liquidnet Overview: Leading Global Electronic Trading Network
Liquidnet Overview Leading Global Electronic Trading Network 1 Trusted brand and partner to the buyside for ~20 years Group Revenue Mix Group Revenue and by Region2 (2019) EBITDA3 ($m) ● Buyside clients collectively manage ~$33tn1 in equity and fixed 339 302 income assets 239 16% 64 ● Integrated int
Slide 8: Liquidnet Equities: Leading Dark Execution Specialist
Liquidnet Equities Leading Dark Execution Specialist 1 Dark trading is a critical and stable portion of global EU Dark Trading as % of US Market Dark Trading market activity On-venue Activity as % Total Volume 12 1.5 18% ● Key part of market activity in Europe 10 1.2 15% ● Accounts for ~15% of marke
Slide 9: Liquidnet Fixed Income: Extensive Global Network
Liquidnet Fixed Income Extensive Global Network with Substantial Growth Potential 1 Comparatively early stage business, launched in 2015 Trading Protocols Used (% Survey Respondents) 0% 20% 40% 60% 80% 100% ● US and European IG and High Yield launched Sep 2015 Bloomberg ● Emerging Market bonds launc
Slide 10: Liquidnet Investment Analytics
Liquidnet Investment Analytics Nascent Business with Dedicated Data Science Team and AI / Machine Learning Tools Key Product Suite Corporate sentiment Central Bank sentiment Acquired in 2019 Automated investment research Corporate earnings call NLP generated Central Bank provider using natural langu
Slide 11: Strategic Rationale
Strategic Rationale
Slide 12: Vision: Creation of Powerful Electronic Trading Ecosystem
Vision: Creation of Powerful Electronic Trading Ecosystem Complementary Combination of Asset Class Expertise, Clients and Platforms ● Building on the strengths of each partner ● Serving the varied needs of dealer and institutional market participants across all major asset classes Roadmap ● Offering
Slide 13: Focus Opportunity: D2C Electronic Credit Trading
Focus Opportunity: D2C Electronic Credit Trading Leveraging TP ICAP’s Network & Building on Liquidnet’s Capabilities 1 Post-2008 regulation prompted behavioural changes that Dealers Providing Significantly Less Liquidity meaningfully altered market structure (Dealer Inventory of US Corporate Bonds -
Slide 14: Focus Opportunity: D2C Electronic Rates Trading
Focus Opportunity: D2C Electronic Rates Trading Leveraging Liquidnet’s Platform and TP ICAP’s Dealer Connectivity / Product Expertise 1 Regulatory change has encouraged growth in OTC Rates IRD Exchange & OTC Trading OTC IRD Turnover by derivatives, compared with exchange-traded Avg. Notional Turnove
Slide 15: Focus Opportunity: Enhanced Data & Analytics
Focus Opportunity: Enhanced Data & Analytics (D&A) Leverage Complementary Capabilities with Cross-Selling Potential 1 Accelerate D&A’s buyside penetration Moving Up the Value Chain ● Sell TP ICAP’s data to ~500 fixed income1 buyside clients already on-boarded on Liquidnet’s platform ● Enhance TP ICA
Slide 16: Financial Impacts, Business Transition & Timelines
Financial Impacts, Business Transition & Timelines
Slide 17: Transforming TP ICAP's Earnings Profile
Transforming TP ICAP’s Earnings Profile Impact of Transaction: Shift Toward Higher Revenue Growth and Profitability Enhanced revenue growth and margin expansion for the combined group Cross-cycle Revenue Growth Potential Drivers of Growth and Margin Expansion ● Product creation, growth in customer b
Slide 18: Financial Highlights and Medium Term Targets
Financial Highlights and Medium Term Targets Attractive Financial Benefits for Shareholders Key transaction terms ● Enterprise value (‘EV’) of $575-700m on a debt-free/excess cash-free basis, representing 9.0x – 10.9x LTM Jun-20 EV / Adjusted EBITDA1 ● Approx. $525m paid in cash at completion: App
Slide 19: Business Transition
Business Transition Robust Governance Structure in Place, with Detailed Planning Underway Detailed transformation planning in-progress ● Chief Transformation Officer will lead the transition ● Transformation Management Office will report to the CEO ● Strong governance framework in place with clear l
Slide 20: Timeline and Approvals to Close
Timeline and Approvals to Close Completion of the acquisition is conditional on, inter alia: 1) Completion of re-domiciliation via the incorporation of a new Group holding company in Jersey 2) TP ICAP shareholder approval and launch of rights issue 3) Approval by various regulatory bodies, including
Slide 21: Concluding Remarks
Concluding Remarks
Slide 22: Transformational Opportunity for TP ICAP
Transformational Opportunity for TP ICAP Positions TP ICAP for Sustainable Long-Term Growth + Complementary combination with ability to create value for both sellside and buyside market participants ● Electronically-enabled client base and trading platform ● Global network with connectivity to the f
Slide 23: Q&A
Q&A
Slide 24: Appendix
Appendix
Slide 25: Liquidnet Corporate Evolution
Liquidnet Corporate Evolution 20 Year History of Building a Leading Franchise Organically and Through Acquisitions Liquidnet completes 3 AI-focused acquisitions in ~2 years Acquired Acquired Trades its one Trades its two and billionth share billionth share Liquidnet Acquires Vega- A single 5mm share
Slide 26: Liquidnet Historical Financials
Liquidnet Historical Financials $m 2018 2019 LTM Jun-20 Operating Revenues 341.5 302.2 339.2 Reported EBITDA 82.2 31.0 46.9 (+) Equity-based Compensation 7.7 8.3 14.6 (+) Dual Occupancy Expense 6.5 1.6 0.4 (+/-) Other (0.4) 2.1 2.1 Adjusted EBITDA 96.0 43.0 64.0 Note: Based on US GAAP financials 26
Slide 27: Glossary
Glossary All-to-All (A2A) System allows any member, dealer or client, to negotiate and trade with any other member Blotter Sync A scanning mechanism used to find matches for incoming order flows / indications of interest Client-to-Client (C2C) System allows only clients to negotiate and trade with o
Slide 28: Disclaimer
Disclaimer THIS DOCUMENT, ITS CONTENTS AND ANY INFORMATION PROVIDED OR COMMUNICATED DURING ANY PRESENTATION OR DELIVERY OF THIS DOCUMENT ARE NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA,
Slide 29: Disclaimer
Disclaimer In giving this presentation, none of the Company, the Target or HSBC or their respective advisers, representatives, affiliates, directors, officers, employees or agents undertake any obligation to amend, correct or to provide the recipient with access to any additional information or to u
Slide 30: Disclaimer
Disclaimer Any securities referred to herein have not been and will not be registered under the applicable securities laws of Australia, Canada, New Zealand, the Republic of South Africa or Japan and may not be offered or sold within Australia, Canada, New Zealand, the Republic of South Africa or Ja