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August 1, 2014 11:29 pm
Evercore Partners, the independent investment bank, has agreed to buy International Strategy & Investment Group, a research-focused brokerage, for up to $440m.
As part of the transaction, Evercore intends to merge ISI with its own institutional equities business, a separate subsidiary which is 40 per cent-owned by employees. More than 90 per cent of the payment will go to ISI, which is majority-owned by founder Ed Hyman.
Together those two businesses make about $230m and employ about 300 staff, according to people familiar with the matter. About 15-20 per cent of them are expected to lose their jobs in a quest for cost-savings.
People familiar with the matter said Evercore had agreed to pay up to 8m of its shares for the business, valuing ISI at more than $400m, based on Evercore’s stock price of $50.13.
But Evercore is only paying 30 per cent of the total up front, with the remainder to be paid over five years if the business meets profitability targets. The deal is expected to be announced as soon as Monday.
Shares in Evercore fell 8.1 per cent after details of the deal were published by Bloomberg News.
Although research is often seen as a cost centre, the acquisition is part of an attempt to cover more companies and try to win more underwriting business, said people familiar with the strategy.
Evercore, run by chairman Roger Altman and chief executive Ralph Schlosstein, has built itself from a mergers and acquisitions boutique to offer a broader array of investment banking services.
Robert Walsh, Evercore’s chief financial officer, said in June that his company had already increased the size of its research effort, partly in a quest for more revenues from debt and equity offerings.
“We’ve grown the number of companies we cover, we’ve grown the number of clients we served, and that’s been instrumental in increasing the number and the value of the underwritings that we participate in,” he said, acknowledging: “It’s been a tough market to do that, certainly much tougher than we had envisioned when we launched it.”
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