Hedge fund goes public . . . through the backdoor

Posted Jun 5th 2009 12:30PM by Tom Taulli
Filed under: Deals, Private Equity

Since early 2007, it's been rough for the shareholders of Cowen Group Inc (NASDAQ: COWN), a mid-tier investment bank. The company's stock price has gone from $20 to low of $3.54.

But lately, Cowen's stock price has perked up, primarily because of takeover overtures. For example, there was an offer from Rodman & Renshaw at $7 per share.

However, this was rebuffed. Instead, yesterday Cowen agreed to a so-called "reverse merger" with hedge fund Ramius LLC, which will own 71% of the new entity. On the news, Cowen's shares increased 37%.

It's an interesting strategy. No doubt, the hedge fund industry is under pressure in terms of regulation and capital raises. So why not diversify into other businesses?

And, for the most part, Cowen's investment banking platform can be a source of high-margin revenues, especially as M&A and public offerings begin to come back. Interestingly enough, Cowen is likely to be a launching pad for more deals in the sector as other investment banks struggle to stay afloat.

Tom Taulli is the author of various books, including The Complete M&A Handbook and the founder of BizEquity, a free online business valuation tool for small businesses. You can reach him at his personal blog.

Tags: cowen, cown, Hedge Funds, HedgeFunds, inthenews, Investment Banking, InvestmentBanking, Ramius