Canadian Imperial Bank of Commerce is adding to its expanded U.S. footprint by acquiring Cleary Gull, a boutique investment banking company based in Milwaukee.
The deal, announced Tuesday morning, bolsters CIBC’s capacity to serve the middle market – privately owned companies that are the bread and butter of its U.S. commercial banking business – particularly in the U.S. Midwest. Cleary Gull’s typical clients are businesses owned by families and entrepreneurs with earnings before interest, taxes, depreciation and amortization (EBITDA) of US$50-million or less.
Ever since CIBC paid US$5-billion in 2017 to acquire Chicago-based PrivateBancorp Inc., a mid-market commercial bank that also specializes in private wealth management, CIBC has been looking for smaller, add-on deals to expand its reach. The bank’s adjusted U.S. profits grew 24 per cent over the last year, fuelled by rapidly rising loans and deposits, and revenues from the U.S. capital-markets business rose 7 per cent. Even so, CIBC’s shares trade at a steep discount to peers, as wary investors await proof that the bank can sustain its expansion in the fiercely competitive U.S. market.
Terms of the deal to acquire Cleary Gull were not disclosed, but it is not financially material to CIBC and is expected to close in the fourth quarter of this year, subject to regulatory approvals.
“This, for us, is part of our building process," said Roman Dubczak, CIBC’s head of global investment banking, in an interview. "It fits well, should grow very well, and certainly fills some gaps for us in terms of our coverage capabilities in the U.S.”
Founded in 1987, Cleary Gull has 23 bankers who will join the capital markets arm of CIBC Bank USA, which was built on the foundation of the former PrivateBank, as PrivateBancorp was commonly known. For a brief period starting in 2001, Cleary Gull was owned by Royal Bank of Canada through its Dain Rauscher Inc. subsidiary, but it was soon spun off.
Cleary Gull specializes in mergers and acquisitions, private-capital placement and debt-advisory services, especially in industries such as manufacturing, business services, consumer goods and technology. Their roster of clients is heavily weighted toward the U.S. Midwest but spans much of the country.
“There’s a temptation on behalf of a lot of the U.S. investment banks to go upmarket,” serving “larger and larger” companies, Mr. Dubczak said. “Our intent is to really stick to the private economy and to stay true to the client base that we’ve established through the PrivateBank acquisition.”
Earlier this year, CIBC also made changes to its U.S. leadership, naming Michael Capatides as the new chief executive of CIBC Bank USA. Mr. Capatides succeeded Larry Richman, the long-time head of the former PrivateBancorp, who steered the bank through its merger with CIBC and has since moved to a new role as chair of the U.S. business.
There could be more U.S. deal-making to come for CIBC, either in capital markets or to bulk up its commercial-banking and wealth-management operations, as analysts predict further consolidation among mid-sized U.S. banks. At an investor day late in 2017, CIBC predicted that 40 per cent of anticipated growth in capital markets earnings would come from the U.S.
“As we evolve with our clients, if we need to fulfill capabilities, we will. It feels pretty good now," Mr. Dubczak said. “We’re very comfortable that there’s a lot of territory for us.”
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