The asking price for Morgan Keegan and its roughly 1,000 patient brokers has reached levels that Raymond James executives apparently found irresistible. The question is why they waited so long.
Now, CEO Paul Reilly is telling reporters that he's still not happy with making a big acquisition, but it's a once-in-a-generation chance to grab all those advisors and their $80 billion in aggregate AUM.
It's not clear what got Raymond James to change its mind. When initial talks to sell Morgan Keegan to private equity firms collapsed in November, the deal was worth a reported $1.1 billion.
Even at a 15% discount from that price, Raymond James is not getting a massive deal here. It's paying about 1.3 times book value and a little under a year's revenue for its one-time rival -- not bad, but not a spectacular windfall either.
Regions is still pulling $250 million out of the firm before selling, so that part doesn't change.
Nobody's talking about whether Raymond James will be indemnified for Morgan Keegan's outstanding legal liabilities.
The private equity buyers demanded that provision in their proposed deal, but if it fell off the table here, it could add another $200 million or so to Raymond James' long-term cost here.
In any event, the deal is done and smaller brokerage firms can return to the M&A market to raise capital.