SVB Financial Group has sold its investment bank to a management team led by Jeff Leerink, the founder and CEO of SVB Securities, backed by funds managed by US hedge fund Baupost Group. The investment bank is based in Boston and is a top firm for healthcare and technology industry advisory work.
SVB Financial said on Sunday that Leerink's group will buy the business for a combination of cash, the repayment of an intercompany note, the assumption of "significant" deferred compensation obligations and other liabilities, and that SVB Financial will keep a 5% equity instrument. The purchase price includes US$55m in cash and the assumption of US$26m of debt and other liabilities, according to the sale agreement filed in a US court.
SVB Securities will be rebranded Leerink Partners – returning to the name of the business bought in 2019 that formed the core of the investment bank.
SVB Securities was formed when SVB Financial bought Boston-based healthcare and life sciences boutique Leerink Partners in January 2019. SVB paid US$280m for the business, plus US$60m in retention pay for staff over five years. In December 2021, SVB Securities added MoffettNathanson, a New York-based sellside research firm, and the enlarged subsidiary was called SVB Leerink and then renamed SVB Securities in February 2022.
MoffettNathanson is not included in the deal and will remain part of SVB Financial.
California-based SVB Financial entered Chapter 11 bankruptcy proceedings in March after a run on the deposits of its retail arm, Silicon Valley Bank, threatened its solvency. SVB Financial kept control of SVB Securities and SVB Capital, the venture capital arm, and said at the time it had attracted "significant interest" for the investment bank.
SVB Financial said on Sunday a hearing to get court approval for the deal with Leerink's team is scheduled for June 29 and the transaction should close soon after that.
"Our firm plays a critical role in the healthcare ecosystem, and this transaction will allow us to continue serving our clients across all corners of the healthcare industry," Jeff Leerink said in a statement. He said the management team had made a "significant capital investment".
SVB Securities has made just over US$2bn in fees in the past decade, according to Refinitiv data, and had been hiring and growing in recent years. It focuses on capital raising, M&A advisory, structured finance, equity research, and sales and trading. The firm said it completed 1,160 transactions since 2019 that raised more than US$230bn.
Sources previously said it had a strong entrepreneurial culture that could help keep the business together, and it was trying to prevent an exodus of staff while the sale process went on. It hired Jason Auerbach from UBS in 2021 as its global co-head of investment banking and global head of tech investment banking, as well as other senior bankers from UBS, Goldman Sachs, JP Morgan, Barclays and Morgan Stanley.
That came at a cost, however: SVB Securities reported a US$95m loss for 2022, compared with a US$48m profit in 2021 and a US$119m profit in 2020, driven by an increase in compensation costs. Its income was US$508m in 2022, down from US$609m in 2021.
SVB Financial said Leerink's team had won following a competitive bidding process. It said it is continuing to evaluate strategic alternatives for SVB Capital and other assets and investments.
Centerview Partners is financial adviser to SVB Financial and Alvarez & Marsal is restructuring adviser. Rothschild & Co. is financial adviser to the Leerink team and Baupost.
Adds details on sale agreement terms