Piper Jaffray Companies of Minneapolis is acquiring Sandler O’Neill + Partners, L.P. of New York in a deal expected to close in January 2020. A definitive agreement for the transaction was announced on July 9.
The combined company will be named Piper Sandler Companies and will bring together the leading investment banking firm focused on the financial services industry with the growing Piper Jaffray investment banking platform. The combination accelerates Piper Jaffray’s goal of prioritizing and building its M&A advisory business, adds a differentiated fixed income business and significantly expands the breadth and depth of the firm’s equity research, and sales and trading franchise.
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. In addition, Piper Jaffray agreed to provide $115 million in long-term retention incentives, primarily in restricted stock of Piper Jaffray Companies, to Sandler O’Neill employees. All Sandler O’Neill partners have entered into employment agreements in connection with the transaction.
Transaction Highlights:
- 2018 pro forma combined advisory services revenues of $573 million
- 2018 pro forma combined investment banking revenues of $839 million
- Nearly doubles revenues for the Piper Jaffray fixed income business
- Expected to be over 10 percent accretive to Non-GAAP EPS in 2020
- Increases Piper Jaffray operating margin, ROE and employee productivity metrics
- Creates platform with leading middle-market advisory practices in multiple industry sectors
Following the merger, Jimmy Dunne, senior managing principal at Sandler O’Neill, 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 Companies, as well as the firm’s leadership team. Existing Piper Jaffray investment banking, capital markets, fixed income and equities personnel dedicated to the financial services sector will be combined with the Sandler O’Neill team.
“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,” said Chad Abraham, CEO of Piper Jaffray. “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.”
“We are excited to combine with Piper Jaffray and build on the strength of both of our businesses,” Dunne said. “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.”
“I’m excited to be leading the expanded financial services practice at Piper Sandler and joining the board of directors,” said Jon Doyle. “We believe, in partnership, we will leverage our talent and expertise to enhance our combined capabilities. With Piper Jaffray’s scale and our shared vision, we look forward to growing our business for the future.”
Founded in 1988, Sandler O’Neill is the leading investment banking firm focused on the financial services industry. Sandler O’Neill has advised on more financial services M&A transactions than any other investment bank every year since 2012. In that timeframe, Sandler O’Neill has advised clients on 498 financial services M&A transactions with an aggregate deal value of $124 billion. Sandler O’Neill brings more than 300 professionals to the combined company, with 85% of these professionals serving in client-facing positions. Over 90 percent of Sandler O’Neill partners have been with the firm for over 10 years.
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.
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 Companies. Sandler O’Neill was represented by Wachtell, Lipton, Rosen & Katz.