Icap needs to keep banks on board

Only time will tell whether it was a better deal for Icap or the owner banks. On the face of it, $775 million for a business that generates just north of $37 million in profits per year does not seem like the bargain of the century.

However, the fact that the share price was up nearly 10% on the day is a good indication that the deal is a long-term winner for Icap.

Icap is buying much more than the brokerage fees EBS raises. It is how the deal affects the relationships between the broker and its banks that will determine whether Icap will come to regret its big spend.

In theory, the banks who decide not to take up Icap's offer of a share in the business will lose an important incentive to use EBS. However, Icap's track record in maintaining good relations with banks bodes well for its ability to keep cost-sensitive banks on board. The fact it is a soundly managed fully listed business will also mean there will be more transparency about just how EBS operates.

The clarity about the mechanics of the EBS/Icap deal is in sharp contrast to another, smaller deal in the space that was done last week. The purchase by VantagePoint Venture Partners of Gain Capital shows just how murky the world of venture capital can be. The deal, which sees the forex platform selling an undisclosed stake for $40 million, leaves those who are entrusting their hard-earned cash with the business none the wiser about its structure and prospects.

Other venture capital deals have been more revealing. The landmark deal between Saxo and General Atlantic that saw 25% of the business sold for $126.5 with $30 million each going to the two founders Lars Seier Christensen and Kim Fournais, was much more transparent. As well as a quarter of the business, the $126 million also bought two seats on the board for GA.

The deal seems to have been positive for all involved, with the two founders still holding a majority stake and therefore a significant interest in seeing the business continue to succeed. Saxo has seen continuing expansion with its key assets, and those who founded the business remain in the driving seat.