Investment bank Piper Jaffray Companies has sold Advisory Research through two separate transactions which will result in the firm exiting its traditional asset management business.
The midstream energy business of Advisory Research, is being sold to Tortoise Capital Advisors, while the remaining Advisory Research business is being acquired by a partner group led by Matthew Swaim, managing director and executive committee chairman at Advisory Research.
Piper Jaffray expects to generate net cash proceeds from these two transactions of approximately USD60-70 million, exclusive of potential earn-out proceeds.
“Tortoise has built an excellent investment management platform focused on essential assets,” says Deb Schoneman, president of Piper Jaffray. “The Advisory Research energy infrastructure investment team will continue to bring their deep expertise and strong investment process to existing clients, while leveraging Tortoise’s knowledge in investing across the energy value chain. In addition, Tortoise will bring expanded distribution and product capabilities to enhance growth potential.”
Tortoise Chief Executive Officer, Kevin Birzer, says: “We are thrilled for the experienced Advisory Research energy infrastructure team to join Tortoise. Bringing together two of the longest tenured midstream energy teams will create an even stronger and deeper combined team.”
The remaining Advisory Research teams, based in Chicago, will continue to manage their existing products and client assets.
“Without significant investment, the business lacks the potential to scale to a level that will represent a meaningful part of Piper Jaffray’s overall business mix,” says Schoneman. “We are confident that Matt and his partners will continue to provide excellent stewardship of these client assets by providing exceptional investment results and client service to their client base.”
Commenting on the sale, ARI Executive Committee Chairman, Matthew Swaim, says: “With our long-tenured, focused investment teams executing in areas of the market that require unique expertise, we are thrilled to return the ARI business to its legacy partnership roots. We will continue to invest in premier investment talent, maintain our intense focus on client success and grow our niche investment strategies with like-minded clients.”
Piper Jaffray acquired Advisory Research in 2010. Since that time, the asset management industry has continued to evolve in terms of product availability and distribution capabilities. During this same timeframe, Piper Jaffray significantly scaled its banking platforms to become a market leader in its areas of focus, creating enhanced financial performance and shareholder returns. These two factors combined led to the decision to pursue a sale. Advisory Research currently represents approximately 5% of Piper Jaffray’s adjusted net revenue.
“These transactions sharpen our focus with respect to core strengths,” says Chad Abraham, chief executive officer of Piper Jaffray. “We intend to reinvest the capital from this sale in our core areas of expertise through both organic investments and corporate development activity in order to generate higher returns for our shareholders.”
The transactions are expected to close in the second half of 2019 and are subject to customary regulatory and closing conditions, including client consents. The earn-out provisions of the Tortoise transaction provide additional potential consideration based on year one results. Faegre Baker Daniels is serving as legal advisor and Ardea Partners is serving as the exclusive financial advisor in connection with these transactions.
