BMO Financial acquired KGS-Alpha Capital Markets, a New York-based fixed income broker-dealer specializing in U.S. mortgage (MBS) and asset-backed securities in the institutional investor market.
Founded in 2010, KGS provides institutional clients with market-based structuring solutions and first-class client service. It has 135 employees, including 84 sales and trading professionals, concentrated in New York with seven other offices across the U.S.
The acquisition will complement BMO Capital Markets’ existing MBS trading business and will make BMO a dealer in securitized products with special emphasis on agency-backed residential and commercial MBS products.
“BMO has built a solid capital markets platform in the U.S.,” said Pat Cronin, CEO, BMO Capital Markets. “The acquisition of KGS is highly complementary to our strategy, leverages our existing capabilities and allows us to better serve our clients. The size and scope of the MBS bond market represents a tremendous opportunity to continue to diversify our platform, and grow revenues with key new initiatives.”
Upon closing, KGS-Alpha will be rebranded as BMO Capital Markets. The KGS management team, sales and trading professionals will become part of BMO Capital Markets’ trading products group led by Kelsey Gunderson, managing director and head of Global Trading Products at BMO Capital. Corporate support area professionals will report to their respective areas within BMO.
The MBS bond market represents the second-largest U.S. fixed income securities market (behind U.S. Treasuries) with more than $9.3 trillion in outstanding debt as of Q3/17 and more than $200 billion traded on a daily basis.
In connection with the transaction, BMO Capital Markets acted as financial advisor, and Sullivan & Cromwell and Osler, Hoskin & Harcourt acted as legal counsel to BMO. Credit Suisse Securities acted as financial advisor, and Simpson Thacher & Bartlett acted as legal counsel to KGS.
