Stifel Financial (SF) surprised Wall Street last week with its $575 million agreement to buy KBW(KBW).
KBW has struggled the last two years and reduced staff. In 2011 it lost $31.7 million, and on Nov. 5 it announced that it had lost $5.2 million for the third quarter
In discussing the deal with American Banker, Stifel Chief Executive Ronald Kruszewski and KBW CEO Thomas Michaud said the strategic rationale behind it was a simple: St. Louis-based Stifel wants a bigger slice of specialized market for advising bank M&A, and KBW, of New York, could benefit from the stability, new customers and broader services its new parent would bring to the table.
The following is an edited transcript of that conversation.
Why is this deal happening now?
KRUSZEWSKI: It is our goal to build a premier middle-market investment bank, and KBW is the premier specialist firm in the country and the world. It's a great fit, and ultimately what better time than the present to do this deal.
Tom, when I asked you this spring about the future of the firm, you said your focus was all about making it the most valuable it can be.
MICHAUD: That hasn't changed and, frankly, that is what this merger is all about. We believe KBW is more valuable being a partner to Stifel. …This merger presents us with more opportunities to be helpful to our clients. As this industry evolves we think that scale matters, and we like the products that Stifel has. In particular we think their private client offerings are excellent, and they also have a very strong fixed-income group.
Does this transaction say anything about state of bank M&A, or where we are in the cycle?
MICHAUD: No, not at all. …We just felt that this was the right merger to do because – and I'll speak for KBW - we felt we were in a better position with the scale of a combined company.