What do you do after gobbling up some 700 Piper Jaffray advisors? If you’re UBS, you make another deal — this time to rake in about 340 FAs in McDonald Investments’ branch network for $280 million.
“This doesn’t surprise me. They’ve become the new Wachovia when it comes to buying a series of regional brokerages,” says Chip Roame, head of Tiburon Strategic Advisors in Tiburon, Calif.
(Wachovia Securities, which was formed after a merger with First Union in 2001, added Prudential Securities in 2003. Prior to the merger, First Union picked up Wheat First Butcher Singer in 1998, Everen Securities in 1999 and First Albany in 2000; Wachovia acquired Interstate/Johnson Lane in 1999.)
The latest M&A news, Roame adds, signals UBS’ intention to establish a strong U.S. retail presence via acquisitions, as the company has been quick to point out.
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At the same time, Roame explains, KeyCorp’s sale of McDonald shows that banks are interested in taking the opposite tack and getting out of the brokerage field. “We are seeing the continued bank exodus from the retail brokerage business after the failure of promised synergy.”
UBS officially wrapped up its $500 million purchase of Minneapolis-based Piper Jaffray’s retail operations on August 14, some four months after the deal was first announced. On September 6, the Swiss brokerage firm went public with plans to acquire Cleveland-based McDonald Investments’ branch network.
“This [McDonald Investments] transaction, coupled with the recent acquisition of the private client branch network of Piper Jaffray, further strengthens UBS Wealth Management’s presence in the U.S.,” says Marten Hoekstra, who heads the group. The group now includes more than 8,000 FAs, not including those with McDonald.
Now, UBS is moving aggressively again to add to its ranks — six years after it purchased PaineWebber, which had more than 8,000 reps at the time, including those previously affiliated with J.C. Bradford. Analysts say UBS’ retail network in the U.S. topped 9,000 in 2000 and that the company isn’t interested in getting back up to that level anytime soon.
Still, the number of UBS FAs could near 8,500 if most McDonald reps stay on.
“They’ve bought Piper Jaffray’s brokerage from U.S. Bancorp, now it’s McDonald Investments from KeyCorp,” explains Roame. “My guess is that this is not the last acquisition we’ll see from them.”
When UBS announced its Piper Jaffray acquisition earlier this year, it had the potential of drawing in some 840 advisors. Since that time, about 100 Piper Jaffray reps have elected to leave. According to UBS, that represents a retention level of about 80 percent, which suits the company just fine.
“We are very satisfied with the retention levels of financial advisors and client assets,” says Hoekstra.
And, for his part, Roame says the firm should be pleased. “That’s a pretty good retention level,” the consultant says. “Financial advisors, like everybody, don’t like change. And you’ll always have some percent that will depart.”
Other observers agree. “UBS has done a great job with Piper Jaffray,” says Howard Diamond, managing director and COO of Diamond Consultants, a recruiting firm in Chester, N.J. “They learned a lot from Merrill Lynch,” which recently acquired Advest from AXA but reportedly failed to retain a majority of the firm’s roughly 500 advisors.