Written By Joe Mantone & Mushir Shaikh
Published on June 4, 2019 by S&P Global Marketing Intelligence
Performance Trust Capital Partners LLC recently closed its acquisition of Banks Street Partners LLC, but that is not the end of the company's expansion efforts.
After completing the Banks Street deal, Performance Trust is looking to add M&A advisers and increase client wallet share by creating more collaboration between its balance sheet management and investment banking teams. The company is also considering adding increased equities capabilities to its platform.
Chicago-based Performance Trust had historically provided fixed-income and balance sheet management strategies to depositories. However, in recent years the company has been adding bank and thrift M&A i-bankers, starting with the hire of Houston-based Dan Bass in 2012. Performance Trust also enhanced its ability to raise capital for depositories with hires like Head of Investment Banking Daryle DiLascia in 2018 and Matt Shields, managing director of equity capital, in 2017.
The Banks Street deal should accelerate the M&A financial advisory growth. Since 2015, Performance Trust ranks 17th on the number-of-deals depository M&A league table but jumps to sixth on a pro forma basis when including Banks Street's deal history.
DiLascia said the best way for Performance Trust to grow market share is to add talent in geographies where the company does not have a large presence, like the Midwest, Northeast and West. He noted that most of the pro forma investment banking business comes from Texas and the Southwest, where Bass has been successful, and the Southeast, where Atlanta-based Banks Street has focused.
"As we build a national footprint on the banking side, I'd expect us to further climb up the league tables," DiLascia said in an interview.
Performance Trust does have a national footprint on the balance sheet management side of the business, and referrals from that part of the company could lead to more investment banking business. A potential challenge is that those on the balance sheet side might be hesitant to make referrals because they fear losing business if their bank clients sell or merge with other institutions.
But DiLascia said the thinking of the balance sheet management side of the business has evolved as the team has gotten more involved with the strategic and capital markets discussions Performance Trust has had with clients.
"Our focus is not to go out and sell a bunch of banks," DiLascia said.
He added that Performance Trust can certainly help banks find partners or targets, if that's what the clients want. "But we are also trying to work together to figure out ways for the companies that we work with to remain independent," DiLascia said. Often, balance sheet strategies can help depositories earn their independence, he said.
As part of the effort to build more collaboration with Performance Trust's investment bankers, the balance sheet management team added Anthony Ruggiero, who was most recently with Wells Fargo Securities LLC but also worked at Sandler O'Neill & Partners LP and Keefe Bruyette & Woods Inc. David Gobberdiel, head of balance sheet strategies, said the Ruggiero hire reflects Performance Trust's efforts to take a more holistic approach with its depository clients as it relates to their balance sheet strategy and strategic planning.
"[Ruggiero] certainly has a background that straddles both of those worlds," Gobberdiel said in an interview.
Equities trading is another possible area of expansion for Performance Trust as DiLascia said the company continues "to actively think about" the business.
He said Performance Trust is analyzing different niche options as it has become challenging to generate a profit margin in the equities business. Performance Trust would like to have a greater ability to work with companies on stock repurchase plans, at-the-market offerings and underwritten new issue equity capital market transactions.
"To have a presence in that space in terms of institutional and maybe high-net worth bank investor relationships would be helpful in that regard," DiLascia said.
But he said the company is not looking to develop a traditional equity research, sales and trading operation. The company would consider becoming a market maker for smaller, less liquid publicly traded depositories. This would provide a service to smaller banks by trying to create more liquidity in their stocks.
DiLascia added that the company is also studying ways it can leverage its existing industry and regulatory analytics to develop a research product. "I don't think we're going to create earnings estimates and buy, sell, hold recommendations," DiLascia said. "But we would provide unique content that isn't currently available through other providers."
Performance Trust would likely gear the research more toward depository institutions and would focus less on creating a product that is heavily consumed by institutional investors, which is the typical target audience for traditional equity research.
However, DiLascia said the decision on the equities business is not imminent.
"We're going to spend some time thinking about how we want to come market and if we want to come to market," he said. "It's probably a 2020 event at the earliest would be my guess."