With acquisition, PNC set to enter IPO market
PNC Financial Services Group is getting into the business of advising companies that want to go public, capitalizing on the hot market for initial public offerings at a time when banks are looking for new sources of revenue.
PNC has reached a deal to buy the independent equity advisory firm Solebury Capital Group and expects to close later this week, PNC spokesman Fred Solomon confirmed Monday.
The terms of the deal were not disclosed, though the Financial Times reported the price was about $50 million for the 27-person boutique advisory firm, which has locations in Stamford, Conn., and New Hope in Bucks County.
Solebury and other independent advisers act as intermediaries between corporate issuers and the banks. The business can be lucrative but doesn’t carry the same risks and regulatory scrutiny as an investment bank because they are advisers, not underwriters.
“What you’re finding is that all the banks are trying to find businesses to buy that will allow them to expand their activities outside the regulatory area,” said Dick Bove of Rafferty Capital Markets.
The IPO market is the hottest it has been since 2000, as companies try to take advantage of a bull market, said Jay Ritter, a professor of finance at the University of Florida who tracks IPOs. Two of the largest IPOs of the year were in recent weeks, with Alibaba’s record-setting $25 billion offering, followed by Citizens Financial Group’s $3 billion IPO last week.
Solebury works with large private equity groups such as Blackstone Group as well as investment banks such as Goldman Sachs, according to its website. It has worked on other prominent IPOs, including Hertz Global Holdings Inc., Vitamin Shoppe Inc. and Dunkin Brands Group.
Solebury helps its customers handle investor relations and regulatory requirements. It complements PNC’s business banking services around mergers and acquisitions, Solomon said. PNC provides advisory services to companies but doesn’t act as an investment bank.
“It expands the suite of services that PNC’s corporate and institutional banking business can offer, enhancing our relationship-banking model and ability to deliver insights to clients,” Solomon said. PNC provides M&A advisory services through Harris Williams & Co., which it bought in 2005.
Pairing the M&A business with Solebury’s services could offer some efficiency, Ritter said. Employees working in M&A develop industry expertise that could be helpful in taking a company public.
“Somebody who knows about biotechnology and health care, they work on an M&A deal and an IPO deal,” Ritter said.
“That’s where some of the value gets created by allowing employees to do more than one thing as a little niche ebbs and flows.”
Solebury Chief Operating Officer and Chairman Victor Cohn declined to comment when reached late Monday. Solomon said PNC expects the firm’s name, locations and employees to remain the same.
Chris Fleisher is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or [email protected].