Liquidnet M&A well set, IPO still on hold

NEW YORK (Reuters) - Liquidnet Chief Executive Seth Merrin said on Monday that the company is well equipped with cash to make acquisitions if needed, and said the economic crisis has made such targets a bargain compared to a year ago.

"We have quite an arsenal of cash we can lever," Merrin told Reuters Global Exchanges and Trading Summit.

"The good news for us is that companies funded by private equity and venture capital are being cast out, so there are a number of opportunities we are looking at that a year ago would have cost ten times more." Many such companies, he said, are either facing bankruptcy or in need of an exit.

While Merrin acknowledged that Liquidnet, the dominant electronic marketplace serving buy-side trading firms in the United States, was in talks with potential takeover targets, he declined to elaborate, saying only that "we will look at opportunities that fill in product gaps."

"We are not an acquisitive firm," Merrin said, pointing out that Liquidnet has only made one acquisition in recent years.

SITTING TIGHT FOR IPO

Despite the recent thaw in the market for initial public offerings and rally in banking stocks, Merrin said the company still has no plans to launch its expected IPO until 2010.

Liquidnet filed for a $500 million IPO in July 2008, but in December decided to postpone it until the IPO markets improve.

"Thank God we don't need the money," Merrin said. "Pick your spot -- why leave money on the table?"

A number of companies have recently had to settle for smaller deals to get their IPOs done in a difficult IPO market.

Merrin said the collapse in the fall in bank stocks, some of which had dropped 80 percent by year's end, had forced the company to delay its IPO because investors would consider them to be Liquidnet's comparable stocks.

Another challenge for Liquidnet's IPO could come from the fact that the deal's proceeds will go to employees and existing shareholders, with none being reinvested in the company, the sort of IPO investors have not embraced in this down market.

"Thank God we didn't do the IPO in the fall- who needs the distraction of watching your stock drop?" said Merrin.

He said the IPO was a way to reward employees so the company will wait for now, even as bank stocks have begun to recover and, he said, the current stock market rally seems to have legs.

"We're in no rush," he said.