PNC to acquire Aqueduct, expand private equity fundraising

Through a new acquisition, PNC Bank is growing its business serving the world of private equity.

The banking subsidiary of PNC Financial Group said Tuesday that it has reached a deal to buy Aqueduct Capital Group, a Charlotte, North Carolina-based broker-dealer focused on raising capital for private equity, private credit and real asset managers.

"This acquisition is complementary to existing capital advisory capabilities provided through PNC's subsidiary, Harris Williams, and will enable us to expand our ability to serve the global capital needs of the private equity industry," said Michael Thomas, head of corporate and institutional banking at PNC, in a prepared statement.

The acquisition is slated to close by mid-summer. Financial details were not disclosed.

It's the latest move by the Pittsburgh-based bank to expand its investment banking business. In the first quarter, PNC's capital markets and advisory unit reported $306 million in revenue, up 18% from a year ago.

Scott Siefers, an analyst at Piper Sandler, said the merger was likely "a pretty digestible transaction" for PNC. But more importantly, it appeared to dovetail nicely with PNC's capital markets strategy.

"Investment banking has pretty clearly been an area of focus for them," Siefers told American Banker. "Harris Williams, over a period of years, has been a great transaction for them and a great driver. So far as this complements the Harris Williams business, that should be a good thing over time."

PNC bought Harris Williams 20 years ago to extend merger and acquisition advisory services to middle-market companies and private equity firms. The business has eight industry groups, including defense and government services, consumer and industrials.

Aqueduct, founded in 2003, represents what it calls a "select" group of alternative fund managers, bringing them together with investors.

"We are excited to join forces with PNC and believe the synergies created with our Harris Williams colleagues will enhance a shared commitment to deliver superior outcomes to long-standing, trusted client relationships," Aqueduct Founder Frank Edwards said in a statement.

This is not the first time PNC has acquired a capital markets business to fuse with Harris Williams. In 2014, the company bought Solebury Capital Group, a consulting firm that focused on taking companies public. And in 2019, PNC purchased Ambassador Financial Group, a broker-dealer that specialized in balance sheet management, investment banking and capital markets services.

"PNC has done myriad small capital markets-related transactions over the years," Siefers wrote in a research note on Tuesday.

In its announcement, PNC emphasized that the merger with Aqueduct creates few business conflicts. According to John Neuner, co-CEO of Harris Williams, Aqueduct has "minimal overlap in our respective client bases or limited partner relationships."

Siefers said the customer separation was important, "so hopefully you don't cannibalize your own business in bringing on another partner."

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Gerard Cassidy, an analyst with RBC Capital Markets, agreed that the acquisition would bring more business to PNC — but perhaps not much.

"We believe this acquisition will complement PNC's existing capital advisory capabilities provided through its subsidiary, Harris Williams, and will enable PNC to expand its ability to serve the global capital needs of the private equity industry," Cassidy wrote in a research note. "The bottom line impact, however, is not expected to be material, in our opinion."

Siefers said it is difficult to assess the impact without knowing the price.

"But at least strategically, it looks like it makes plenty of sense," he said.