How TD’s Cowen Inc. acquisition gave it a seat at the table with the most influential investment bankers in the U.S.Jeffrey Solomon speaks at the Milken Conference 2024 Global Conference Sessions at The Beverly Hilton in Beverly Hills, Calif., on May 7.When Cowen Inc. chief executive Jeffrey Solomon ushered two senior leaders of TD Securities into his office in March, 2022, he was entirely unaware of how the ensuing 20-minute pitch would redraw the future of his company.
A few months after the Cowen deal closed, TD also terminated its takeover of Tennessee-based First Horizon Corp., upending its U.S. growth plans. That left the spotlight shining on TD’s integration of Cowen, which had just become far more difficult in an increasingly challenging market. “For us, the next phase of it was to say, okay, to really excel we need research in the United States,” Mr. Ahmed said in an interview. “We need the ability to trade equities in the U.S. and we need to strengthen our investment banking platform. And the industrial logic of this acquisition was that Cowen gave us all three.”
At the same time, TD Securities was struggling with mounting costs as it invested in the business, integrated Cowen and onboarded employees, pushing compensation expenses higher as it competed to retain talent. TD had earmarked US$450-million to spend on the integration, including US$200-million to pay staff incentives to stay with the company.
But Mr. Ahmed says he expects to bring the efficiency ratio down in the mid- to high-sixties range over time as the market rebounds – allowing TD to bring in more revenue through Cowen – and its investments in the business start to pay off. TD and its peers have also been culling their work forces to rein in rising expenses. Since launching a restructuring program late last year, TD has cut about 1,200 jobs from its base of more than 100,000 employees. About 20 per cent of those reductions were made in TD Securities.
The real test will play out over the next few years as the bankers from different cultures – TD, a highly regulated bank with a more buttoned-down culture, and Cowen, a scrappier mid-market dealmaker – work together and share insights on the business they hope to win. TD’s U.S. team has been meticulously planning the seating chart, stacking the trading floor to make sure the right people are sitting together and help blur the stiff lines between the disparate teams.
If the senior leaders fail to convince TD and Cowen staff that they are better as a combined team, then they have “missed the opportunity,” Mr. Solomon said.