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Janney eyes depository i-banking 'scale' in deal for FIG Partners

Philadelphia-based Janney Montgomery Scott LLC, has agreed to acquire FIG Partners LLC, an Atlanta-based investment banking and research firm that focuses on the bank and thrift space.

The companies did not disclose terms of the transaction, which is expected to close in the second quarter. Janney had been looking to add coverage of depositories for some time, said Joseph Culley, head of the capital markets group.

"We have found in depositories, that you really need to have scale to be in the business," Culley said in an interview.

FIG Partners, which is a market maker in more than 800 bank stocks, offered the breadth of coverage that Janney was seeking, Culley said. After the deal, Culley expects the combined team to have 70 i-bankers, and Janney's i-banker headcount went to 51 from 40 after the 2018 purchase of HighBank Advisors LLC.

The HighBank deal added a business services i-banking vertical to Janney, which also covers healthcare, infrastructure, real estate and financials. FIG Partners' bank coverage does not overlap with Janney's financials coverage, which focuses on business development companies, insurers and specialty finance. The addition of FIG Partners will make financials the largest vertical for Janney.

Synergies

Janney hopes to realize synergies between its fixed-income and private client group businesses and FIG Partners clients. Janney's fixed-income business underwrites certificates of deposits for about 200 community banks, and the company plans to make more investments in fixed income to take advantage of the combined platform with FIG Partners, Culley said. He added that FIG Partners wants to hire more senior i-bankers, and Janney hopes to assist with that effort.

"For a certain banker, this transaction will potentially make the combined platform more attractive," Culley said.

After the deal closes, FIG Partners' capital markets business will have access to Janney's retail distribution network, consisting of some 830 financial advisers. It is possible the financial advisers could even provide investment banking leads for FIG Partners, Janney's President and CEO Timothy Scheve said.

Scheve noted that the advisers are spread out over about 120 locations along the U.S. east coast and further west toward Michigan, and many of them have developed relationships with banks in their communities. He said some advisers work with banks by providing asset liability management services to assist with their portfolios or help depositories with some of their activities within their trust companies. The executives or board members from the banks could also open accounts with the Janney advisers.

"What we [haven't] had the ability to do in the last few years is help those banks raise capital or grow their business," Scheve said.

The deal will also allow FIG Partners, an independent company founded in 2003, to become part of a much larger organization. Janney is a subsidiary of Penn Mutual Life Insurance Co., which reported revenue of $3.2 billion in 2018.

Larger platform

FIG Partners CEO Geoffrey Hodgson said although it was not actively looking to sell itself, his company needed to partner with a larger platform in order to keep serving its clients, which are getting bigger.

The company's revenue increased 30% year over year in 2018, nearly doubling since 2014, thanks to growth in its investment banking business, Hodgson said.

The FIG Partners and Janney talks, first reported by S&P Global Market Intelligence, had been ongoing since early 2018 and heated up in the second half of the year, Hodgson said. The companies were introduced through Freeman & Co. investment bankers Gagan Sawhney and Chris Pedone who advised Janney on the deal. Blank Rome LLP served as legal counsel to Janney. Silver Freedman Taff & Tiernan LLP served as legal counsel to FIG Partners.

The members of FIG Partners executive management team are expected to join Janney. Hodgson will oversee the equities and investment banking businesses. FIG Partners Co-Head of Investment Banking Matthew Veneri will become co-head of investment banking along with Janney's Head of Investment Banking Cliff Booth. FIG Partners Co-Head of Investment Banking Greg Gersack will become head of equity capital markets. FIG Partners Director of Research Christopher Marinac will have the same title with the combined company.

Culley said Janney remains on the lookout for other growth opportunities, noting there are a number of small advisory-focused i-banks in the marketplace.

"We'll continue to be active," he said. "There's a lot of fragmentation in the investment banking area."