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JPMorgan sells research unit to buyout firm
April 1, 2009 / 11:01 AM / 9 years ago

JPMorgan sells research unit to buyout firm

NEW YORK, April 1 (Reuters) - Investment firm The Hidary Group has acquired an independent research firm that JPMorgan Chase & Co (JPM.N) inherited as part of the Bear Stearns Cos takeover last year, the bank said on Wednesday.

Named Primary Insight, the 15-person company will be led by its co-founders, David DeRose and Leighton Thomas, who decided to partner with Hidary to acquire the firm after cutbacks at JPMorgan meant they could not hire more staff or make improvements to the unit’s technology as they wanted.

A spokesman for the bank declined comment on the buyout and research cuts, which DeRose put at 30 percent of JPMorgan’s research department.

“If you stay under a research division that’s being cut 30 percent, we can’t get any headcount,” said DeRose. “When we went to JPMorgan and asked to spin this out, that deal made sense to them because we’re going to immediately grow our staff.”

The Hidary Group financed the buyout and will have a majority stake in the company, while JPMorgan will have a minority stake. The terms of the deal, including the size of the parties’ respective stakes, were not disclosed.

Primary Insight is an alternative research group that sets up conversations between institutional investors and experts across industry sectors in return for a subscription charge from the investors.

DeRose and Thomas declined to comment on Primary Insight’s revenue or the details of JPMorgan’s investment.

Jack Hidary, one of two brothers who runs the investment firm, also declined to give details of his company’s stake in the venture.

The Hidary Group previously joined DeRose and Thomas in 2001 to found a similar firm called Vista Research, which was sold to McGraw-Hill Cos Inc MHP.N in 2005.

DeRose and Thomas said they plan to improve the company’s technology and hire seven to eight people this year, which they would not have been able to do within JPMorgan.

“Our intention with this business is to really pour a significant amount of money into technology investment that’s ... going to allow these guys to service clients better,” said Hidary. “I expect these guys to really take off now.”

Banks across Wall Street have been cutting spending on traditional research since the Securities and Exchange Commission, worried about conflicts of interest, in 2002 banned firms from using banking fees to pay analysts.

There are now a handful of companies offering alternative research and the sector is worth about $450 million to $500 million, DeRose said.

Gerson Lehrman Group is the largest such company, according to DeRose and Thomas.

Gerson Lehrman was launched in 1998 and has a network of about 200,000 experts. The New York-based company posted revenues of $284 million in 2008 and has about 700 staff globally, a company spokesman said. (Reporting by Elinor Comlay; Editing by Andre Grenon)

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