Today Stifel Financial Corp., the St.Louis-based financial services holding company, said it is buying Thomas Weisel Partners Group, a San Francisco-based investment bank, in a deal valued at more than $300 million, according to the release.
Under the agreement to create “the premier middle-market investment bank,” Thomas Weisel will operate as a subsidiary of Stifel, giving the combined companies estimated annual revenues of $1.6 billion and $1 billion in equity capital. The deal is expected to close at the end of June. Upon completion of the merger, Ronald J. Kruszewski, will remain as president and CEO of Stifel Financial Corp. and will co-chair the Board with Thomas W. Weisel, CEO of Thomas Weisel Partners.
The merger is a plus for Stifel advisors in the firm’s Global Wealth Management division—they will have more products and research, says Aite Group senior analyst Doug Dannemiller. Thomas Weisel also has a small retail wealth management business, catering to the ultra wealthy, with about $5.5 billion assets under management, but Dannemiller says the two platforms will probably be consolidated. Furthermore, Thomas Weisel currently clears primarily through National Financial, but Dannemiller says that trading activity would likely be shifted to Stifel Financial’s self-clearing operation.
Regionals like Stifel, RBC Wealth Management and Raymond James, among others, have been winning advisors and retail client assets over the course of the last two years—largely at expense of wirehouses. However, Dannemiller says the tarnish from the financial crisis is receding, and we’re entering a new phase of competition, where it is going to be about products, services and pricing. “So to me this sort of merger where it is going to give scale new products, it’s a very timely,” says Dannemiller.
Meanwhile, small investment banks focused on growth stocks such as technology and health care like Thomas Weisel Partners are getting swallowed up says Andre Cappon, president of The CBM Group. “You can’t make a profit anymore by doing the occasional IPO of the technology firms, there aren’t enough of those,” says Cappon.
Stifel’s brokerage unit, Stifel, Nicolaus & Company, has been on a bit of a tear recently, expanding its distribution network with acquisitions. Stifel, Nicolaus is a part of Stifel Financial’s Global Wealth Management business and includes 1,900 financial advisors with $100 billion assets under management, and $1.1 billion in assets at Stifel Bank & Trust. In late October, Stifel completed its acquisition of 55 branches from UBS, adding 495 financial advisors and support staff from the branches and approximately 144,000 accounts with about $16.2 billion in assets under management.
In mid-April, Stifel bought Missouri Valley partners one of the largest investment advisors in St. Louis from First Banks, Inc. Then last week, Stifel announced its move to expand its commercial banking activity in the St. Louis area—Stifel Bank & Trust has grown to roughly $1.1 billion from $130 million three years ago. Stifel hired Southwest Bank’s senior officer, John Haffenreffer, in a strategy that Kruszewski in the release says recreates “the banking models of Southwest Bank and Mark Twain Bank, both having carved out extremely attractive niches in the local commercial banking field,” but with the addition of an investment bank.
Both Stifel Financial and Thomas Weisel Partners have investment banking, research, institutional sales and trading, asset management and wealth management divisions, but Weisel says there is virtually no overlap in investment banking and less than a 10 percent overlap in research coverage. “Our platform adds key growth sectors to Stifel’s investment banking business, particularly in technology, healthcare and energy. Stifel has one of the largest global wealth management groups with nearly $100 billion in client assets, which is a great complement to the combined investment bank,” says Weisel.
“Thomas Weisel Partners is a well respected name on the Street. They’re largely an institutional investment bank play, so it will be some volume on that front for Stifel,” says Dannemiller. According to Stifel’s presentation to investors today, the merger fast tracks Stifel’s technology and health care investment banking growth and footprint, which would otherwise take years to build.