Piper Jaffray takes home Deal of the Year for buying Sandler O’Neill

Getting to scale
Against the backdrop of soaring bank M&A last summer, Piper Jaffray Cos. announced the acquisition of Sandler O’Neill & Partners LP, creating the newly formed Piper Sandler and instantly becoming a leading investment bank in financial services. While Piper Jaffray grew organically and through hiring over the last 10 years, CEO Chad Abraham concluded that acquisitions were needed to fuel expansion in some sectors, including financial services. “It was hard to imagine getting enough scale fast enough without acquisitions,” he told Mergers & Acquisitions. “We’ve had conversations with Sandler for many years, and we’ve admired their franchise.”

The Minneapolis boutique made moves in the financial services sector a few years ago, including hiring five managing directors from Sterne Agee, and acquiring two Chicago firms: River Branch Holdings LLC and BMO Capital Markets GKST Inc. But they weren’t enough to make the bank a market leader in the sector, and the deals pale in comparison with the Sandler merger.

Big deal
Closed in early January 2020, the acquisition of New York-based Sandler marks Piper Jaffray’s biggest acquisition to date. The price is $485 million (including $350 million in upfront cash and $135 million of restricted consideration, primarily restricted stock). Total consideration could climb to $600 million, with an additional $115 million for employee retention incentives (primarily restricted stock). However you do the math, the deal represents more than half of Piper Jaffray’s roughly $930 million market cap. It is expected to add $300 million in annual revenues for the merged company, which is called Piper Sandler Cos.

Quack ties
The deal included Sandler’s leadership: Jimmy Dunne, senior managing principal at Sandler, who has become a vice chairman of Piper Sandler and senior managing principal of the company’s financial services business; and Jon Doyle, senior managing principal at Sandler, who has become a vice chairman, senior managing principal and head of Piper Sandler’s financial services group. He also joined the Piper Sandler board and the company’s leadership team.

For Sandler, the deal means the end of its life as an independent company, a history that included the near destruction of the firm on Sept 11, 2001. Sixty-six of the firm’s 171 partners and employees died in the September 11 World Trade Center attacks. Herman Sandler, a co-founder of the firm, and Chris Quackenbush, the head of investment banking, were among those who perished. As a memorial to Quackenbush, Dunne bought all the duck ties he could find at the Brooks Brothers store across the street from Sandler O’Neill’s office and handed out the “quack ties” the day the deal was announced.

Before the coronavirus crisis, more bank M&A was expected on the horizon. “There has been a lot of consolidation in the bank space,” Abraham told Mergers & Acquisitions. “Frankly that’s been very consistent over the last 10 years and has created a great opportunity for Sandler. But there are still 5,000 banks, and we expect the pace of consolidation to continue.”

To see all the award winners, check out Meet the winners of Mergers & Acquisitions’ M&A Mid-Market Awards.