Transaction Terms Analysis: Hedge Fund Ramius Buys Investment Bank Cowen to Go Public Pursuant to Reverse Merger

On June 3, 2009, one of the nation’s largest private hedge fund managers, Ramius LLC, agreed to a “reverse merger” with public investment bank Cowen Group, Inc.  As a result of this reverse merger, the private hedge fund management company will merge with and obtain control of nearly 71 percent of the stock and operations of the publicly-traded investment bank.  This merger not only allows Ramius to go public without the formality and expense of an initial public offering, a major benefit of all reverse mergers, but also gives the firm an investment banking platform on which it can offer new services, including fixed-income sales, trading and origination and real-estate banking.  Ramius anticipates that its new platform may prove profitable as a source of high-margin revenues, especially as the hedge fund industry faces the imminent possibility of intensive regulation.  For more on hedge funds entering the investment banking business, see “Interview With Drinker Biddle Partner David Matteson on Citadel’s Entry Into the Investment Banking Business,” Hedge Fund Law Report, Vol. 2, No. 20 (May 20, 2009).  This article summarizes the material terms of the transaction, based on an analysis conducted by the Hedge Fund Law Report of the Transaction Agreement and Agreement and Plan of Merger and the Asset Exchange Agreement.  The article will be of particular interest to any hedge fund manager contemplating any sort of transaction with a public entity, and any manager considering entry into the investment banking business.

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