KBW eyes possible acquisition of restructuring firm

By Svea Herbst-Bayliss

NEW YORK (Reuters) - Boutique investment bank KBW Inc (KBW.N) would be ready to pay $100 million for a restructuring specialist that could bolster its portfolio as the economy slows, its top executive said on Monday.

"I think we would consider a small acquisition if the right one showed up," John Duffy, KBW's chairman and chief executive officer, said at the Reuters Finance Summit. "We could probably afford $100 million or more.

Duffy said a restructuring specialist would fit well with the firm, best-known for its Keefe, Bruyette & Woods brokerage arm.

"That area probably has a great couple of years ahead of them in terms of restructuring work," Duffy said, saying it would be a "nice add-on" to the company's research-oriented business.

"It would be new, but certainly complementary to investment banking, and counter-cyclical," Duffy said.

Currently, investment banking and institutional research each make up roughly 40 percent of KBW's business with fixed income making up 10 percent to 15 percent and asset management accounting for the rest.

"If we spend $100 million on something, it arguably could be the fourth leg on the stool."

He did add, though, that no takeover is imminent.

"We've had active conversations with one firm," including over whether the firm might instead go public or raise capital. He declined to name the firm.

He added: "We haven't been in negotiations with anyone yet."

Duffy has already begun pushing KBW into new directions. This summer, he prompted the firm to eye the real estate market even though troubled mortgages were already roiling markets.

KBW hired analysts and traders and is planning to hire a team of investment bankers for this area in the future, he said.