More talk about M&A, this time skirting the edge of hostile territory: Sterne Agee has offered $200 million to acquire debt-heavy Dallas brokerage firm SWS Group.
Sterne Agee CEO Jim Holbrook has previously made several bids for SWS and its roughly 550-broker network, which brought in $366 million in revenue last year. But since all were rejected, he's now gone straight to the media to make his pitch.
Holbrook is now offering $6.25 a share for SWS, which at yesterday's close represents a measly 2% premium on the stock price -- which is already 44% depressed from the company's book value.
That's a fire sale bid, and while SWS management is taking the offer seriously, it remains to be seen just what that kind of opportunistic deal would net Sterne Agee.
Buying a rival brokerage firm really entails buying the book of business and the advisory relationships. A hostile or insulting offer may succeed -- either with the board or, if it comes to that, in the open market -- but only at the cost of alienating the advisors.
If the goal here is to acquire scale, then alienating the SWS broker force is the last thing Sterne Agee wants. And even if Holbrook just wants to buy the clients, keeping those accounts could be more trouble than it's worth if the advisors break away and try to take their best relationships with them.
As anyone who knows industry M&A knows, it's hard enough to keep these mergers cordial when everyone goes in feeling good about the deal. Hostile takeovers don't work out nearly as well.