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Finance Finesse

Middle-Market I-Banks Attract Buyers

In order to expand and better serve private equity clients, more investment banks are scooping up rivals

In order to expand and better serve private equity clients, investment banks are scooping up other middle-market investment banks. 2013 has played host to several deals, and in June alone, three acquisitions were announced. Minneapolis-based investment bank Piper Jaffray Cos. (NYSE: PJC) grabbed a fellow middle-market firm, Edgeview Partners LLP. Edgeview, headquartered in Charlotte, N.C., provides M&A advisory services.

Edgeview's sector expertise, including industrials and defense, was one of the reasons Piper Jaffray picked it up. The firm was looking to expand its industrials M&A business, says Scott LaRue, co-head of investment banking at Piper Jaffray. "The private equity community is a place that could support additional resources focused on sponsor exits and sponsor monetization," LaRue says.

Dallas-based Allegiance Capital Corp. snagged EquiCap partners, a Dallas-based middle-market investment bank that provides corporate financial arrangements for private companies. Allegiance provides selling, financing and recapitalization services.

The EquiCap purchase adds to Allegiance's expansion. The firm, which was founded in 1998, has been growing for several years, and moved into the New York market in 2006 through the acquisition of Altid Capital, opened an office in Chicago and will soon launch an office in Silicon Valley.

Size gives the larger investment banks access to more resources, including training programs and software.

The bar for investment banking services has been raised, and buyers these days are "information junkies," says Allegiance CEO David Mahmood. "What it takes to bring a deal to a successful conclusion these days requires a lot more analysis, work and competency."

"There are a lot more independent investment banking firms out there," continues Mahmood. "When you go through a market that has been tough, you're in a world where it's either eat or be eaten. You're either going to grow or become part of a larger organization."

Deloitte Corporate Finance LLC purchased McColl Partners, a Charlotte, N.C.-based investment bank, to strengthen its middle-market M&A advisory position. With offices in Charlotte, Atlanta, Dallas and Los Angeles, McColl provides M&A advisory services to the consumer, industrial business, financial services, health care, energy and technology companies.

Before the June deals, in April, a consortium led by the Carlyle Group LP (Nasdaq: CG) closed a deal for New York investment banking firm Duff & Phelps Corp. for about $666 million. The buyers plan to help Duff & Phelps continue to expand internationally.


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