The Swiss banking giant UBS added the retail unit of Midwestern gem Piper Jaffray today to its wirehouse brokerage division for $500 million in cash and other considerations.
“This transaction is a natural fit with our current wealth management offering in the U.S.,” said Martin Hoekstra, head of UBS’ U.S. Wealth Management unit.
Industry observers tend to agree that it was a good move for UBS. “It’s an absolute coup,” says recruiter Rick Peterson of Rick Peterson & Associates in Houston. “I’ve always considered Piper to be the Legg Mason of the West,” he says, echoing other recruiters praise of the Midwestern regional. Based in Minneapolis, Piper Jaffray has 91 branches, nearly all of them west of the Mississippi with a few in the Northeast, and 840 representatives.
That may be the real value of the deal. UBS’s brokerage force has been stagnant for more than a year and should all of the Piper Jaffray advisors elect to join the new firm the deal will add roughly 840 advisors to the 7,520 advisors already within UBS’ U.S. wealth management division. If all of Piper’s $52 billion in client assets come along as well, UBS’ client assets will approach $700 billion.
Exactly how many reps will come and thus how many client assets will follow is dependent on two things mainly, say observers: cultural fit and retention packages. How Piper reps will be compensated as well as details of any retention package are not yet known, but top producers and managers will be flying to Piper headquarters in Minneapolis this week to find out their fate.
Similar deals suggest there may be some challenges ahead. Merrill Lynch has not fared well in its retention reps from The Advest Group, which Merrill bought from French firm AXA Financial at the end of 2005. Both the culture and the retention package have been cited as reasons for an exodus of at least half of the 515 Advest reps since the merger in December 2005.
“UBS is not Merrill Lynch, but it’s moving in that direction in terms of more controls on the advisors, more overhead etc.,” says Andre Cappon, president of the CBM Group, a financial services consulting firm in New York. “Some older producers may not wish to make that adjustment.”
They may not however, be in a great position to do otherwise. The Piper Jaffrey brokerage unit struggled last year: Net revenues dipped 3.5 percent to $347 million from $360 million, and pre-tax operating income plummeted 32 percent to $18 million from $27 million, the lowest in three years. This is not the first time Piper has been acquired. In 1998, US Bancorp bought the regional brokerage only to spin it off in 2003 (see story http://registeredrep.com/mag/finance_happy_divorces/index.html).