CHICAGO -- Minneapolis-based Piper Jaffray Cos.’ acquisition of Bank of Montreal’s Chicago-based municipal bond sales, trading and origination business, BMO Capital Markets GKST Inc., is expected to close Friday.
The deal stands to bolster Piper’s municipal capabilities from its sales, trading, and analysis to its public finance banking relationships, but it also spells an end to Harris Bank's long, local municipal tradition. It also will leave some professionals without a job.
BMO acquired Chicago-based Harris Bank, which operated commercial and investment banking businesses, in 1984.
A Piper spokeswoman declined to comment until after the closing on the number of employees the firm has sought to keep or how many accepted offers made after the deal was announced in July.
Municipal sources said over the summer that Piper offered positions to well over half of the roughly 130 in the group being acquired, including traders, underwriters, sales professionals, analysts, and bankers. Those not offered positions will receive severance packages if they remain with the company until Friday’s closing.
BMO’s decision to shed its municipal group makes a slight dent in competition for underwriting business in Chicago, market participants said. BMO was a top contender for Chicago business with the BMO Harris commercial bank behind it. That’s because the ability of broker-dealers to provide the city with credit support has grown more prominent in underwriting selections as the city’s credit rating has deteriorated, forcing it to re-tool its short-term borrowing program and other banking contracts. BMO’s sale of its municipal arm severs that link with the commercial bank, which remains part of BMO.
“It’s never been more important to be able to offer credit products to the city as part of the relationship,” said one local banker.
Several public finance sources also said some senior bankers with longstanding issuer clients who plan to stick with Piper for the time being may end up looking for positions elsewhere.
“For some bankers in some sectors, their client base needs the kind of products and credit support” offered by a commercial bank, said one banking source.
The BMO group’s primary appeal to Piper stems from the GKST group BMO acquired in 2008. Griffin, Kubik, Stephens & Thompson Inc. was a boutique firm that brought a strong bank-qualified, middle markets business to the table with well-respected sales, trading, banking and distribution capabilities, adding to BMO’s efforts to build its national stature.
Piper Jaffray's bid to buy BMO’s municipal business is part of the firm’s expansion of its fixed income and financial institutions group.
"We continue to be in growth mode all over but particularly in fixed income and the FIG space, and we are prudent about growth," Brad Winges, Piper's head of fixed income services and head of investments and trading, said in an earlier interview after the announcement. "This acquisition represents a compelling strategic and cultural fit. GKST and Piper Jaffray have both cultivated a solid institutional business, rich history and client-centric, partnership culture.”
Piper currently ranks 10th among senior managers for the year with a par amount of $11.5 billion. BMO ranks 30th with a par amount valued at $940 million, according to data from Thomson Reuters.
Terms of the acquisition were not disclosed.
