The two leading corporate bond platforms are about to merge. Incapital has entered into a definitive agreement with Bank of America to acquire its LaSalle Broker Dealer Services Division. The transaction will merge two leading retail corporate bond platforms: InterNotes, managed by a joint venture between Banc of America Securities and Incapital, and Direct Access Notes or DANS, previously managed by LaSalle.
Incapital has “been partners with Bank of America for a long time and BofA bought LaSalle Bank,” said Tom Ricketts, president and CEO of Incapital, said in an interview. “BofA essentially had two entities that were servicing the same market, so we all agreed that Incapital would buy the LaSalle entity from Bank of America. We intend to take what’s great from the [InterNotes and DANs] platforms, combine them, and end up with a real significant player in the market.”
Ricketts pointed out that the combination of InterNotes and DANs will “affect a lot of the broker/dealer firms” that sell the two products. “We should be able to give them better service,” he says. The transaction is expected to close in the first quarter of 2008.
The merger couldn’t come at a better time as sales of InterNotes are booming. Incapital sold $1 billion of InterNotes in the first week of February–the “best week ever in seven years,” Ricketts says. Why such phenomenal sales? For quite a few years, “we’ve seen a flat or inverted yield curve, so there was no opportunity cost to leaving your money in a short end of the market. But now that the market has normalized in terms of the [yield] curve, people are looking out the curve to get incremental yield. There are $3 trillion in money markets; if you don’t need that liquidity, people are going to have to be looking further out the curve.”