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Duff & Phelps deal is about size

By
Dan Primack
Dan Primack
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By
Dan Primack
Dan Primack
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December 31, 2012, 4:15 PM ET

FORTUNE — Financial advisory and investor bank Duff & Phelps (DUF) today announced that it would be acquired for around $655 million by a private equity consortium that includes The Carlyle Group (CG).

It’s a $15.52 per share offer, which represents a 19.2% premium to last Friday’s closing price. Assuming no superior offer during an upcoming “go-shop” period, expect the deal to close before the end of June 2013.

In short, this is a deal about size. Or lack thereof.

Duff & Phelps largely competes with the Big 4 audit firms, each of which is already private. Moreover, Duff & Phelps is significantly smaller than each of them, meaning it has had difficulty developing the type of shareholder diversity engendered by a large public float. So the private equity bet here is to take Duff & Phelps private, bulk it up via acquisition and then eventually re-float it as a more legitimate comp.

No specifics yet on what types of acquisitions would be forthcoming, although global financial regulatory churn promises to create all sorts of  potential targets. The buyers have not explicitly set aside additional acquisition capital, but a source says that they’ve “all gone in with the expectation” of providing some when needed.

In addition to Carlyle, the investors include Stone Point Capital, Pictet & Cie and Edmond de Rothschild Group.

Sign up for Dan’s daily email newsletter on deals and deal-makers: GetTermSheet.com

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By Dan Primack
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