Following a strategy of continuous expansion of its footprints, Raymond James Financial, Inc. RJF announced a deal to acquire U.S. Private Client Services unit (“PCS”) of Deutsche Asset & Wealth Management (Deutsche AWM). Deutsche AWM is a corporate division of Deutsche Bank AG DB. The transaction is expected to close in the second half of calendar year 2016.
The deal will expand Raymond James’ footprints in the Northeast and mid-Atlantic region (some of the wealthiest markets in the U.S.). The PCS unit has roughly 200 advisors in 16 locations, with about $50 billion in client assets.
While the financial terms were not disclosed, Raymond James plans to invest 1.4x the PCS unit’s revenues or $420 million. In its presentation, the company elaborated that about 70% of the total investment amount will be utilized for retaining PCS unit advisors.
Nevertheless, the total investment value might be adjusted according to Raymond James’ ability to retain advisors. Further, nearly 400 support staff of the unit will be offered positions. Also, the company will incur $20 million of acquisition & integration-related expenses.
Raymond James CEO Paul C. Reilly said, “Consistent with our growth strategy, this well-respected unit meets our highly selective parameters for cultural and strategic fit, ability to integrate and value.”
Upon closure, Raymond James intends to re-brand the PCS unit as Alex. Brown, a name that goes back to the unit’s founding in 1800. Further, Haig Ariyan, Deutsche AWM’s Co-Head of Wealth Management Americas, will join Raymond James as president of the Alex. Brown division, along with other senior executives from the unit.
Historically, Raymond James has always been successful in retaining advisors of its acquired firms. So this time as well, we believe the company will manage to do the same. Also, the company has been aggressive in recruiting advisors from large brokerage firms including Morgan Stanley MS and Bank of America Corp.’s BAC Merrill Lynch.
Therefore, Raymond James will undertake several steps to retain Deutsche Bank advisers. The company intends to offer 7-year recruitment deals to advisers who will continue to work at their current offices. Raymond James also signed another agreement that will give advisers continued access to Deutsche Bank’s initial public offer flow, as well as research and other services.
Raymond James’ Chief Operating Officer Dennis Zank said, “In terms of integration, we have helped hundreds of advisors transition onto our platform and enjoy the benefits of our extensive technology, marketing and practice management support. As always, we will focus on ensuring this process is executed with thoughtful consideration and minimal impact to advisors and their clients.”
For Deutsche Bank, the deal is part of its ‘Strategy 2020’. Notably, the deal does not include Deutsche Bank’s U.S. private bank, which handles some of its wealthiest clients.
For Raymond James, the deal offers access to alternative investments and sophisticated investment solutions. This will help the company expand its offerings to its existing and future high-net-worth clients.
Further, the deal signifies that Raymond James has strong liquidity position. The company has been boosting its prospects through strategic acquisitions. This year, the company acquired the Canadian asset manager Cougar Global Investments Ltd. and The Producers Choice LLC, a private insurance and annuity-marketing firm.
We expect Raymond James to continue growing through profitable buyouts in the future as well.
Currently, Raymond James holds a Zacks Rank #5 (Strong Sell).
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