Instinet Bet Hits Jackpot

Silver Lake spins gold on a quick sale of the trading firm.
Author:
Publish date:

Private equity firm Silver Lake Partners is cashing in big time on last year's purchase of Instinet, the electronic stock trading platform.

Nomura, a Japanese-based brokerage, is buying Instinet for about $1 billion, sources say.

Last December, Silver Lake paid $208 million to purchase a 65% equity stake in Instinet.

The parties in the transaction did not disclose any terms.

"Nomura is one of the world's premier financial services firms, and we are excited to join its family," said Instinet CEO Edward Nicoll. "This deal will allow us to continue offering our institutional clients around the world the high-quality execution services that they have come to expect from Instinet."

Silver Lake acquired Instinet -- the original electronic trading network (ECN) -- as part of an investment in the

Nasdaq Stock Market

I:IXIC

, which formerly owned Instinet.

The management of Instinet owns the rest of the trading firm.

This summer, Silver Lake announced that it was putting Instinet on the block. Its decision to sell the company less than a year after acquiring it is indicative of the latest trend in the booming private equity world.

Rather than hold onto an investment for several years and make a business more cost-efficient, private equity firms are quickly flipping business they've purchased in subsequent deals or initial public offerings.

Private equity firms have taken in a record amount of money this year and sent the corporate deal market into a tizzy.

It is no doubt a smart time for Silver Lake to unload Instinet, given the continuing mania on Wall Street for exchange stocks and a wave of consolidation in the sector.

Last month, for instance, the

Chicago Mercantile Exchange

(CME) - Get Report

announced it is paying about $8 billion to buy its Windy City rival, the Chicago Board of Trade.

The deal with

CBOT Holdings

(BOT)

, the Chicago's Board's parent company, will create the world's largest derivatives and futures trading platform.

The sale of Instinet also could create a deal market for some of the remaining ECNs.

In recent weeks, a number of Wall Street firms have announced that they've invested money in

BATS, or Better Alternative Trading System, an ECN started in January.

Morgan Stanley

(MS) - Get Report

and

Lehman Brothers

(LEH)

recently purchased stakes in BAT.

ECNs developed 20 years ago as a lower cost alternative to trading on the

New York Stock Exchange

(NYX)

and the Nasdaq.