Sandler O'Neill stands pat, not seeking deals

NEW YORK (Reuters) - Sandler O'Neill & Partners, an investment bank focused on financial services companies, is no longer pursuing a major deal such as a merger as it sees plenty of growth opportunities as a closely held partnership, senior managing principal James "Jimmy" Dunne said on Monday.

In April, Dunne told Reuters he was considering a "transformational" deal that would help the New York firm expand, without selling stock in a public offering.

But a summer of turmoil in financial markets has altered the playing field and convinced Sandler partners they are well positioned to grow without major changes, Dunne told the Reuters Finance Summit in New York.

"This year for us will be a very, very good year. That's not unusual when Wall Street is having difficulty," Dunne said. "I'm less inclined to do something transformational now than I was then."

Sandler O'Neill, formed in 1988, has rebounded since the September 11 attacks on its World Trade Center headquarters killed 66 of 171 employees. A number of small investment banks have gone public in the past few years, but Dunne said Sandler has sufficient capital to support its advisory and trading businesses without going public.

"I don't see how that would serve our clients," he said.

Over the years the firm has held talks with firms proposing alliances and buying stakes, he said.

"People have approached us. I have talked to them. I have considered it, but there's nothing that really interested me," he said.

Sandler has been expanding, though, particularly in fixed-income trading. "We've been hiring a number of those kinds of people," he said, "and we will grow it more."

Sandler's fixed-income area now has about 100 people, he said, up by about 20 this year. That's small relative compared to giants like Goldman Sachs Group Inc (GS.N) or Morgan Stanley (MS.N), but a major expansion for a firm with 260 people.

The flagship M&A business, meanwhile, should continue to benefit from mergers among small- and mid-sized U.S. banks as well as U.S. takeovers by European and Canadian banks taking advantage of a weak dollar.

Many banks also will motivated to sell because of the difficult environment, where it will be easier to boost profits by consolidating and driving down costs.

"We've built a real presence in M&A," he said. "Our clients have grown in size and that will be a big benefit to us."

Sandler also expects to gain market share because as an independent advisory firm it does not have to contend with its own internal credit-related problems.

"Look at firms like Greenhill & Co (GHL.N) The advice business without the risk business is very much in demand." Greenhill is a publicly traded M&A advisory firm that has seen its business boom for several years.

Dunne added that this summer helped illustrate the advantages of being a small, private boutique. Sandler is looking to hire bankers laid off by top-tier firms.

"We fare better in bad times," Dunne said. "When the big firms go the other way, that's when being private, being smaller ... there's greater appreciation for that model."

(For summit blog: summitnotebook.reuters.com/)

(Reporting by Joseph A. Giannone)