Arma intensifies US acquisition talks with Mediobanca backing

Thanks to the new backing of its new Italian bank owner Mediobanca, Arma now has the resources and capital to hold more serious talks with targets, the sources said. A deal could happen by early next year depending on the closure of Mediobanca-Arma transaction, which is penned for September, they said.

The boutique has in recent years looked at US targets, but has long since been constrained by the lack of capital to fund acquisitions, the sources said. Since last month's acquisition announcement by Mediobanca and Arma, many of its peers are now reapproaching the firm to discuss the potential of striking a deal, they said.

Arma is particularly interested in acquiring small and focused tech M&A houses in the US, particularly if they complement the firm's existing niches in areas such as software, cloud services, data, internet and fintech segments, the sources said. It is careful not to repeat the poor track record of large European banks which have tried to expand in the US too rapidly either via large hires or large acquisitions, they said.

The firm's push into the US tech financial advisory market – the world's largest and the most competitive – comes as the boutique looks to provide a more meaningful dealflow for its clients, including the many preexisting European sponsors it has a close relationship with and who are just beginning to open up new offices across the Atlantic in search of new deals, they said.

A physical presence in the US would also allow for closer relationships with many of its US clients who are active investors in European tech, the sources said, adding that around two-thirds of its deals end up in the hands of US buyers.

Before Mediobanca's acquisition, Arma has long since flirted with the idea of bringing in new investors over the past two to three years, they said. Talks included bulge bracket banks, but the firm eventually turned down the idea over worries that this could mean a loss of focus, political infighting and turf battles, which many of its team members left behind when they joined the firm, they said.

Bulge boutiques with similar culture to Arma have also called in to express interest, but worries over account overlaps, brand integration and loss of independence in areas such as promotion and compensation dissuaded the group to pursue that option further.

Mediobanca is, however, a "logical" fit, they said, noting that the Italian bank had the right balance of capital availability but also understood Arma's strength and retaining its freedom with limited overlaps. Arma is expected to operate as an independent entity with control of its profit & loss account with Paul-Noel Guély to continue as managing director, they said.

Among Arma's peers for large deal transactions includes bulge-bracket banks, as well as boutiques including Evercore and Lazard. In the EUR 200m-1bn backet, Arma competes against William Blair, Jefferies, Harris Williams, as well as specialist boutiques such as FT Partners. On smaller deals, which Arma is not highly active, it sees the likes of Raymond James [NYSE:RJF] in the market, the sources said.

Mediobanca's acquisition of Arma is happening amid a wider consolidation of the financial advisory market, including Japan's Mizhuo acquiring US investment banking group Greenhill. Abu Dhabi's ADQ wealth fund was also reportedly considering taking US boutique bank Lazard private, according to the Financial Times. 

However, the sources stressed that Arma is being sold from a position of strength, highlighted by three consecutive financial years in excess of USD 100m revenue on the back of strong tech investment inflow.

Arma declined to comment.

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