One of the oldest private futures brokers is taking on partners in an attempt to capture more market share as futures continue to display dynamic growth. R.J. O’Brien & Associates, Inc. (RJO), which began operations in 1914 and was a founding member of the Chicago Mercantile Exchange has reached a definitive agreement with private equity firms, Spectrum Equity Investors and Technology Crossover Ventures (TCV), to sell a combined majority stake in the company to the two firms. The O’Brien family will retain a substantial minority ownership in the company according to a release in which the terms of the transaction were not disclosed.
The restructured board will consist of current R.J. O’Brien Chairman John O’Brien, RJO CEO Gerald Corcoran, RJO President Colleen Mitchell, three representatives from Spectrum and three representatives from TCV, once the transaction is complete. Corcoran will take on the Chairmanship upon close of the transaction.
“The transaction is emblematic of what we are trying to accomplish,” says Corcoran. “[RJO President Colleen Mitchell] and I have had a very aggressive agenda for growth and we really have done well for the last six years but we want and our shareholders want to accelerate that growth plan. What we have done is partner with two really great private equity firms that can help accelerate our strategic plans and, paramount to us was, remain independence and keep our management team in place.”
Both Corcoran and Mitchell, in an interview shortly after the announcement, stressed that RJO will continue as they have but with more resources to execute their growth strategy.
Mitchell said, “It is an opportunity for us to continue the RJO legacy. We have been doing things well for 93 years and we anticipate taking our reputation and high level of client services and continuing to grow it in the U.S. and also internationally.”
That strategy will include possible acquisitions and a greater international presence.
“We want to accelerate the things that we do well at and be in a position to be selective about acquisition opportunities in the near future. We believe that consolidation within the industry is going to occur, we see it happening at the exchange level and it will probably happen at the FCM level as well. We believe that we have the industry best platform for consolidation of the independents,” says Corcoran.
He adds, “We really want to expand our reach globally. Both in attracting new customers overseas as well as expanding our market share in the foreign futures market space.”
Mitchell adds, “That is one of our strategic goals that we are hoping to accomplish with this partnership.”
Corcoran points out that their new partners have a history of investing in successful tech companies. “They have a history of successful partnerships, they bring great experience and ideas to the table [and a history of] technology innovations.”
Some of the firms Spectrum and TCV are invested in include, RiskMetrics Group, Expedia, e-harmony and netfllix. Both have more than $4 billion in investments. “They really know how to invest in companies were technology is important to the success of the firm,” Corcoran adds.
The deal also raises the specter of an initial publics offering, though Corcoran says, there are no plans for one as yet. “An IPO has always been an opportunity for the O’Briens and it will remain an opportunity under the new structure but there are no immediate plans for an IPO. We could have done an IPO but we rather stay private and have the flexibility to run the business with a lot of oversight from the public markets. We have done a great job over the last 93 years being a private company and we see no reason why being private isn’t an advantage for us.”
The deal apparently will turn RJO, who reportedly was close to deal with Refco before Refco imploded shortly after its August 2005 IPO, from a possible acquisition target to an acquirer.
Mitchell adds, “We feel that we picked the right partners that share our vision and our culture and allow us to capitalize on the dynamic nature of our industry.”
“Nothing is changing here,” Corcoran says, “We just want to execute the plan that we have in place and maybe broaden it a little bit and do it at a quicker pace.”
Corcoran told Futures he wants to see RJO move to the top 10 in Futures’ annual listing of Top Brokers , measured by customer segregated funds. “We want to be in the top 10 soon…We are totally psyched about this.”