UPDATE 1-Piper Jaffray to buy asset management firm

* Piper Jaffray to pay $178 mln in cash, $40 mln in stock

* Advisory Research Inc has $5.5 bln in AUM

NEW YORK Dec 21 (Reuters) - Piper Jaffray Cos (PJC.N) on Monday said it will acquire Advisory Research Inc in a $218 million deal to expand its asset management business.

Chicago, Illinois-based Advisory Research has $5.5 billion in assets under management.

Piper Jaffray will pay $178 million in cash and $40 million in restricted stock.

Brien OBrien, chief executive officer of Advisory Research, will join Piper Jaffray's senior leadership team and report to Andrew Duff, chairman and CEO of Piper Jaffray.

The deal, subject to regulatory approvals, is expected to close in the first quarter of 2010.

Advisory Research has 42 employees. (Reporting by Juan Lagorio; editing by John Wallace)