Piper Jaffray is looking at buying U.S. public finance firms as part of a broad plan to spend funds it generated from selling its brokerage business last year, the company's chief executive said.
The Minneapolis investment bank, which focuses on advisory and underwriting for mid-sized companies, is mainly looking to expand in areas where it already does business, like public finance and international banking, or once did, like asset management.
But acquisitions will be made over time, and at valuations that make sense, Duffy said.
"We want to redeploy some of our capital, but we want to do it thoughtfully," Chief Executive Andrew Duff said in an interview earlier this week.
Piper generated more than $500 million of after-tax proceeds when it sold its retail brokerage business to UBS for $850 million.
It used some proceeds to pay down debt, but expects to take on more debt as it acquires.
Duff, however, said this would only bring its debt levels relative to equity more in line with its peers. The company's borrowings were essentially nil in the most recent quarter, he said.
Public finance, where Piper underwrites tax-free bond deals for cities and other entities, is a fragmented industry among investment banks, Duff said.
"There are a lot of regional and industry-focused firms that are smaller, and have concentrated businesses in a few states, and they would be a good fit for us," he said.
Duff said Piper is looking at acquisitions of small firms with strong market positions, likely in the range of $40 million to $100 million each.
He cited as an example the move by Royal Bank of Canada's RBC Capital Markets unit, announced in April, to buy Cincinnati-based Seasongood & Mayer, Ohio's largest municipal bond underwriter.
Piper is also expanding its overseas efforts. On Tuesday, the company said it agreed to buy Hong Kong-based investment bank Goldbond Capital Holdings for $50 million in cash and stock, about twice the company's book value.
That acquisition will allow Piper to help Chinese companies list in China. Previously, Piper's efforts in China focused on helping companies sell shares in the United States, as well as offering research.
Over time, Duff has said he wants Piper to generate up to 25% of revenue outside the United States, up from 7% in 2006.
Piper is also looking to make additional acquisitions in asset management, after agreeing in April to buy Fiduciary Asset Management for about $66 million.
Duff said Piper could stand to increase borrowings over time to be closer to its peers' ratio of debt to tangible equity, which would be an amount at least equal to its tangible equity of about $700 million.
Piper tends to focus on companies with market values between $200 million and $5 billion.