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Two well known investment banks that frequently work with community banks in New England on M&A and capital raising are merging.
Minnesota-based Piper Jaffray Cos. and Chicago-based Sandler O’Neill + Partners said in a recently released statement that they have entered into a definitive merger agreement. The combined company will be named Piper Sandler Cos. and will bring together the leading investment banking firm focused on the financial services industry with the growing Piper Jaffray investment banking platform.
Under the terms of the merger agreement, Piper Jaffray will acquire 100 percent of the equity and partnership interests in Sandler O’Neill. The transaction consideration will total $485 million, which is based on $100 million of tangible book value on the Sandler O’Neill balance sheet delivered at the time of closing.
Piper Jaffray will pay $350 million in cash to Sandler O’Neill equity holders at the time of closing and $135 million in restricted consideration, primarily in restricted stock of Piper Jaffray Companies, to Sandler O’Neill employee partners.
The new Piper Sandler platform will have industry leading advisory practices in financial services, healthcare and energy with growing franchises in consumer, diversified industrials and technology. Together, the capital markets business will provide clients with tailored offering structures and present a range of equity and debt financing options to help fuel growth.
The combined fixed income business of Piper Sandler will be an advisory-first business model, focused on providing clients with balance sheet management, portfolio analytics and municipal expertise. The joined equity brokerage platform will be among the broadest and largest of any middle market investment bank and positioned to provide unique insights, execution expertise and creative financing solutions across all of the firm’s industry groups.
“Transactions in investment banking are always about the people and culture. We have a long history with Sandler O’Neill. We admire the quality of their professionals, the business they have built and the culture of the firm which is based on many values we share,” Chad Abraham, CEO of Piper Jaffray, said in a statement. “Piper Jaffray is very focused on competing in market sectors where we can be a market leader and leverage our specific expertise. With Sandler O’Neill, we start with the market leader and could not be positioned better to compete in the financial services sector over time. This transaction strengthens, diversifies and accelerates the growth of the Piper Jaffray investment banking, capital markets and institutional distribution businesses.”
Piper Jaffray has agreed to provide $115 million in long-term retention incentives, primarily in restricted stock of Piper Jaffray Cos., to Sandler O’Neill employees. All Sandler O’Neill partners have entered into employment agreements in connection with the transaction.
“We are excited to combine with Piper Jaffray and build on the strength of both of our businesses,” Jimmy Dunne, senior managing principal at Sandler O’Neill, said in a statement. “We truly believe this is the best fit and best opportunity for Sandler O’Neill and our clients. I’m extremely proud of what we have built over the past 30 years and thrilled to have found a partner that shares our passion for the business. I’m committed to the future of the firm and looking forward to all we can accomplish together for our clients.”
Following the merger, Dunne will be named vice chairman of Piper Sandler and senior managing principal of Piper Sandler’s financial services business. Dunne will continue to focus on exactly the same work that he has been doing for the past several years, providing guidance and strategic advice to clients on M&A deals and other transactions.
Jon Doyle, senior managing principal at Sandler O’Neill, will lead Piper Sandler’s financial services business line and all investment banking, capital markets, fixed income and equities resources dedicated to the financial services industry will report to him. Doyle will be named vice chairman, senior managing principal and head of the financial services group of Piper Sandler. Doyle will also join the board of directors of Piper Sandler as well as the firm’s leadership team.
The transaction is expected to close in January 2020 and is subject to obtaining required regulatory approvals and other customary closing conditions.
Piper Jaffray was advised by its wholly owned subsidiary, Piper Jaffray & Co., and was represented by Sullivan & Cromwell LLP. JMP Securities rendered a fairness opinion to the board of directors of Piper Jaffray Cos. Sandler O’Neill was represented by Wachtell, Lipton, Rosen & Katz.
