Stifel Buys KBW

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The Stifel Financial Group has agreed to buy Keefe Bruyette & Woods (KBW) in a deal valued at $575 million, giving Stifel a foothold in the lucrative business of advising financial institutions.  The purchase price represents 2.5x multiple on revenues, consistent with current multiples for research firm properties.   The acquisition is part of a larger consolidation trend.

KBW, which focuses on the financial industry, has around 80 research analysts covering a broad spectrum of companies in the financial sector:  insurance companies, broker-dealers and exchange & order execution firms, equity REITs, mortgage finance companies, asset managers, specialty finance firms, and other diversified financials.

Stifel Financial has an equivalent number of analysts (84) covering a broader spectrum of industries.  Nevertheless, it has substantial coverage of the financial sector and it is unclear how the overlap will be resolved.

In the past, Stifel has assimilated acquired research talent into its own research team.  The current director of research joined Stifel when it acquired Legg Mason’s capital markets group (interestingly, his specialty was property & casualty insurers.)  The assistant director of research joined Stifel from Thomas Weisel.

The acquisition of KBW, which is based in New York, extends Stifel’s aggressive expansion strategy executed over the last five years.  Stifel, based in St. Louis, bought the technology-focused investment bank Thomas Weisel Partners in 2010 and last year made a large investment in Miller Buckfire, a New York firm specializing in restructuring.

Stifel has also been mentioned as a possible buyer of Gleacher & Company, which laid off its equity research staff in August, 2011.

Stifel will retain the KBW brand name and operate it as a separate business division of Stifel.

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