Piper Sandler Companies

NYSE:PIPR

Earnings Call Transcript 2020-Q4

[Operator]

Good morning, and welcome to the Piper Sandler Companies Conference Call to discuss the financial results for the fourth quarter and full year of 2020. [Operator Instructions]

The company has asked that I remind you that statements on this call, that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements that involve inherent risks and uncertainties. Factors that could cause actual results to differ materially from those that are anticipated are identified in the company's earnings release and reports on file with the SEC, which are available on the company's website at www.pipersandler.com and on the SEC website at www.sec.gov.

This call will also include statements regarding certain non-GAAP financial measures. The non-GAAP measures should be considered in addition to, and not a substitute for, measures of financial performance prepared in accordance with GAAP. Please refer to the company's earnings release issued today for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure. The earnings release is available on the Investor Relations page of the company's website and at the SEC website.

As a reminder, this call is being recorded. And now I'd like to turn the call over to Mr. Chad Abraham. Mr. Abraham, you may begin your call.

[Chad Abraham, executive]

Good morning, everyone. Thank you for joining our fourth quarter and full year 2020 call. I'm here with Deb Schoneman, our President; and Tim Carter, our CFO. We will go through our prepared remarks and then open up the call for questions.

Reflecting on the year, from the global pandemic and its impact on the economy and workers to a watershed moment in Racial Justice, to a polarized election, 2020 has brought more change than many could have imagined. Through all of this, my employee partners remain focused on serving our clients, and I could not be more proud of their dedication and resiliency.

Our business is heavily influenced by economic conditions in the financial markets. 2020 was a rollercoaster with equity markets notching all-time highs in February, before plunging 34% and then rapidly rebounding with broad indices, again, setting all-time highs by year-end.

Volatility was extreme during March and April and remained elevated for much of the year in both equity and fixed income markets. Against this backdrop, on a full year basis, we generated over $1 billion in revenues and more than $10 of adjusted EPS, both for the first time in our history.

Beyond this record performance, we also moved our business forward through a number of strategic actions during the year. Our record results demonstrate the strength and diversification of our business and our deep client relationships. Despite the challenges, and maybe in part because of them, 2020 was a year of tremendous growth and transformation for us.

Highlighting the year, we closed on the combination with Sandler O'Neill and became Piper Sandler Companies. We grew market share in all of our business lines. We underwrote a record number of equity and debt financings. We helped clients navigate extreme volatility and executed record equity volumes. We raised a record level of par value for clients in the municipal negotiated market and completed the second most transactions nationwide. We more than doubled our fixed income business by providing differentiated advice to clients, navigating the changing markets.

We invested in our advisory business by completing the acquisition of The Valence Group in April 2020 to expand our industry coverage while strengthening our European presence. We acquired TRS Advisors on December 31st, a restructuring advisory firm to broaden our investment banking product capabilities. We increased our Investment Banking Managing Director headcount by 68% to 138, through focused investments, namely Sandler and Valence as well as internal development. And we rapidly transitioned to a remote working environment while closing and integrating 3 acquisitions, demonstrating the best-in-class service our corporate support departments continue to provide.

Next, let me provide some comments on our overall financial results before turning to Corporate Investment Banking. During the fourth quarter, we generated $400 million of adjusted net revenues and $4.17 of adjusted EPS, both quarterly records. Our strong finish to the year led to adjusted net revenues of $1.2 billion for 2020, an operating margin of 20.3% and adjusted EPS of $10.02, all records.

Key drivers of our success in 2020 include a record year from our market-leading health care investment banking franchise, significant contributions from the Financial Services Group, remarkable performances from both trading businesses and a record year from our public finance franchise.

In addition to benefiting from favorable markets in 2020, our strong relative performance was particularly encouraging. A key component of our value proposition is consistent and profitable market share growth, anchored by our leading franchises and relentless focus on serving clients. Both our revenue and earnings growth, since 2011, illustrate our success.

We have increased revenues in 8 of the last 9 years and growing adjusted EPS at a compounded annual growth rate of 32%. Another key component of our value proposition is the strength and durability of our platform. Through our combination with Sandler, we knew we were partnering with the market leader, but what has been equally impressive is the resiliency of the franchise during challenging markets.

During 2020, Sandler outperformed our expectations and registered one of their most successful years. Their broad product capabilities, combined with deep client relationships and sector expertise continue to drive strong and consistent performance across market cycles.

Turning now to our Corporate Investment Banking results. We generated total Corporate Investment Banking revenues, including advisory services and corporate financing of $256 million in the fourth quarter of 2020, up 45% sequentially. Revenues of $739 million for 2020 were up 35% year-over-year, driven by our market-leading health care and financial services franchises. The breadth of our product expertise and the multiple ways we can assist clients is demonstrated in our full year revenue mix.

During 2020, M&A activity generated 44% of revenues, equity financings contributed 36% and debt and capital advisory engagements produced 20% of total corporate investment banking revenues. Specific to Advisory services, we generated $169 million of revenues during the fourth quarter of 2020, up sharply from the third quarter. For us, activity was led by our financial services and health care groups and included strong contributions from diversified industrials, energy and consumer.

In addition, we saw the benefits of increased CEO and boardroom confidence and more clarity on a post-pandemic outlook. Advisory services revenues of $443 million for 2020 were in line with 2019, despite M&A activity slowing appreciably during the second and third quarters of 2020, as pandemic uncertainty put many engagements on hold.

Our revenues for the year benefited from the addition of the Financial Services Group. The team retained their #1 ranking in bank M&A based on the number of announced deals in the U.S. during 2020, and advised on 6 of the 10 largest bank mergers announced during the year.

With market leadership in health care, financial services, consumer and energy, we are the #2 investment bank in terms of U.S. deal activity in the middle market. Conditions for M&A in the market are strong. Optimism for the rollout of COVID-19 vaccines and a possible end to the pandemic has fueled many businesses to reposition for a post-pandemic landscape.

Demand from PE investors and SPACs, attractive valuations, low financing rates, increasing CEO confidence and an expectation of continued economic growth has accelerated the pace of M&A activity. Our pipeline is strong across our industry verticals.

Turning to Corporate Financing. Our momentum continued, and we generated $87 million of revenues in the fourth quarter of 2020 and a record $295 million of revenue for the full year, up 181% over 2019. Our results were driven primarily by equity financing activity, which continued at a torrid pace during the fourth quarter as market valuations hit peak levels and investor demand remains strong.

In total, we completed 137 equity financings during 2020, raising $62 billion of capital. For us, equity financing activity during the year was concentrated in the health care sector. Our health care team had a standout year, delivering record revenues, underwriting 96 transactions and raising $20 billion of equity capital for clients.

In addition, we ranked in the top 5 for investment banks based on the number of book run IPOs and follow-ons for sub $5 billion market cap companies in health care.

In recent years, we have made significant strides to build our capital markets leadership to complement our market-leading health care M&A platform. The reputation and strength of this team positioned us nicely for the influx of health care companies looking to raise equity capital in 2020.

Our Financial Services Group was also very active in the capital markets during the year, completing 58 debt and preferred stock offerings for banks and other financial services companies, raising $17 billion of capital.

Looking forward to 2021, we're already off to a strong start, and we expect equity and debt capital raising activity to remain strong, albeit at reduced levels from 2020.

Lastly, I want to emphasize our focus on investing in and growing our corporate investment banking platform. When we announced the Sandler acquisition in July of 2019, our goal was to grow annual Corporate Investment Banking revenues to $750 million. In 2020, we recorded close to $740 million.

Our overall investment banking managing director headcount finished the year at 138, driven primarily by the additions of Sandler and Valence. We have a strong pipeline of new hires and the strength of our platform makes us a destination of choice for talented professionals.

In addition, on December 31, we closed on the acquisition of TRS Advisors, an independent restructuring firm. TRS Advisors was founded by Todd Snyder, a veteran banker with 30 years of restructuring experience. Todd will lead our combined restructuring and special situations practice consisting of 20 professionals, including 7 managing directors.

We see synergistic opportunities to assist clients in many of our industry verticals, especially energy and consumer, which have seen significant changes to business models. We continue to see opportunities in certain sectors to broaden and deepen our industry teams through strategic hires or tuck-in acquisitions as well as to grow banker productivity. We also believe there is an opportunity to capitalize on the strength of our U.S. franchises by expanding in Europe. As a result, over the next several years, we now see a clear path to grow annual Corporate Investment Banking revenues to over $1 billion.

Now I will turn the call over to Deb to discuss our public finance and brokerage businesses.

[Debbra Schoneman, executive]

Thanks, Chad. Let me begin with an update on our equity brokerage business. Equity markets in the fourth quarter saw elevated volatility and volumes. Market indices traded higher, driven by optimism on COVID-19 vaccine results and an economic recovery.

Client activity increased with positioning before and after election results in November. Our equity brokerage business generated revenues of $40 million for the quarter, up 18% sequentially and $161 million for the year, up meaningfully compared to the prior periods.

Entering 2020, we were confident there was a significant market share opportunity in front of us as buy-side participants consolidate research, spend and trading towards larger, broader and higher quality providers.

Our acquisition of Weeden positioned us well for this trend, and our thesis has played out as anticipated, driving market share and revenue gain. We traded 11.6 billion shares, up 149% over 2019, as clients continued to seek our trusted relationship and our reputation for premier trade execution.

Our 2020 revenues were up 84% year-over-year. The number of clients trading with us reached an all-time high in December. The breadth of our client base allowed us to cross a significant portion of executed cash trades, resulting in no market impact for our clients. The collaboration within our entire platform to get the best results for our clients is a valuable differentiator.

Our client retention through the Weeden and Sandler combinations has been exceptionally high, and our vote rank with institutional clients has improved significantly. We are capturing mind and market share. The increased scale of the platform has driven efficiencies in our cost structure and profitability is significantly higher.

In addition to our trading capabilities, the quality of our research and specialized equity sales force are key differentiators for us in supporting our record equity financing activity. For contact, we are ranked #1 in terms of breadth of both small-cap and mid-cap coverage and have over 920 stocks under coverage. Our sales force is ranked #1 in the health care, financials and consumer sectors.

As we look forward to 2021, while the market wallet is likely to be down, our goal is to maintain our momentum. We believe there's additional opportunity for market share gains, as we continue to demonstrate the full capabilities of our platform, and the buy-side continues to consolidate towards high-quality firms with scale. Our success is resonating externally and our growth opportunities are robust.

Turning to Municipal financing. Our public finance business finished the year strong with $40 million of revenues for the fourth quarter of 2020, up 51% from the third quarter and 28% from a year ago. We continue to benefit from strong new issuance in the governmental space as clients took advantage of low rates. In addition, we completed several higher fee financings in our specialty sectors as demand for high-yield municipal offerings returned.

For the full year, we generated $120 million of Municipal financing revenues, up 44% from 2019. Low interest rates, combined with strong investor demand, drove record market issuance of $475 billion, 5% higher than the previous peak set in 2017.

Taxable issuance, in particular, was significantly higher in 2020, comprising 30% of new issuance volume relative to 15% in 2019. The increase was driven by a decline in treasury yields, allowing for taxable advanced refundings to be an attractive refinancing option.

Against this market backdrop, we executed well and picked up meaningful market share. Our strong relative performance is a result of our consistent focus over the last decade of steadily building this business. For us, total municipal negotiated issuance of $19.1 billion for 2020 was up 55% year-over-year relative to the market, which was up 17%. In this market, we ranked second based on a number of deals nationwide.

Our outstanding performance in 2020 was driven by a combination of strong governmental issuance, especially in school districts, where we have market leadership and the investments we have made last year to strengthen our presence in Nebraska, Colorado and Pennsylvania.

As we look ahead to 2021, we expect issuance to moderate some from record levels, particularly on the governmental side. Our significant presence in the specialty segment of the market should help offset this decrease as high-yield investor demand has meaningfully improved.

In addition, we have taken a number of key steps in our business to retain momentum in 2021. In Q4, we made significant hires in Colorado, adding a team in special district financing.

Lastly, turning to our fixed income business. Although yields rose slightly late in the fourth quarter, causing some steepening of the curve, rates still remain at historic lows. We continue to help clients invest in a low rate environment within a market flush with liquidity by seeking any available yield curve or spread opportunities that are attractive on a risk-adjusted basis for our clients.

For the fourth quarter, we generated fixed income revenues of $53 million, flat on a sequential basis. Activity was robust across all our client verticals, especially among our financial services clients as they repositioned heading into 2021.

For the full year, we produced $196 million of revenues, benefiting from the combination with Sandler. Heightened volatility, robust client activity, strong execution and deep relationships drove a very successful year for our fixed-income franchise.

From an outlook perspective, in 2021, we anticipate less volatility, which should drive lower bid-ask spreads and reduced volumes. Notwithstanding less robust market conditions, we aim to retain the tremendous momentum in our fixed income business by providing differentiated advice and analytics tailored to define client verticals, serving those clients with product expertise that goes far beyond traditional bonds to include derivatives, loan strategies and securitizations.

We also provide clients with access to the breadth of our new issue taxable and tax-exempt products. In addition, we believe we are in the early innings of realizing synergies driven by the Sandler combination. We see opportunities to increase productivity by capitalizing on our expanded client base and successfully cross selling the unique product and strategic capabilities of both firms.

Now I will turn the call over to Tim to review our financial results and provide an update on capital use.

[Timothy Carter, executive]

Thanks, Deb. As a reminder, my comments will be focused on our adjusted non-GAAP financial results. We generated revenues of $400 million for the fourth quarter of 2020, up 34% sequentially, driven by a significant rebound in Advisory services, combined with strong contributions from each of our business lines.

For the full year 2020, we generated net revenues of $1.2 billion, up 50% over 2019, reflecting the investments we have made through our acquisitions as well as the market leadership and scale we have achieved in many of our businesses.

Turning to operating expenses. Our compensation ratio for the fourth quarter of 2020 was 59.5%, lower compared to prior quarters, resulting from our strong performance. On a full year basis, our comp ratio was 61.9%. We continue to manage compensation levels, while considering investments, employee retention and business outlook. Looking ahead to 2021, we expect our compensation ratio to be near 62% based on our current market outlook and strong pipeline of growth opportunities.

Non-compensation expenses, excluding reimbursed deal expenses of $45 million for the fourth quarter of 2020 continued to reflect the pause on Travel and Entertainment. On a full year basis, excluding reimbursed deal expenses, non-comp costs were $183 million, up 21% over 2019 due to the addition of our acquisitions, which was offset in part by the decline in travel.

We continued to be disciplined in managing our expenses as they are a significant driver of operating leverage. We anticipate that some of the operational changes we have adopted this year included how we engage with clients in certain areas of our business are sustainable going forward.

Looking to 2021, we expect non-comp expenses to gradually increase from current quarterly levels as we anticipate travel will begin to resume in the second half of the year. We estimate our 2021 non-comp expenses, excluding reimbursed deal expenses, will average approximately $48 million to $50 million per quarter.

Now turning to operating margin and income. For the fourth quarter of 2020, we generated record operating income of $109 million, representing a 27.2% operating margin, reflecting the leverage in our model at higher revenue levels. For the full year of 2020, operating income of $250 million increased 81% compared to 2019.

Our operating margin for the year was 20.3%, a meaningful expansion from 16.7% in 2019, driven by the increased scale of our platform, the successful integration of our acquisitions and the benefit of lower Travel and Entertainment expenses. We continued to demonstrate our ability to drive operating margin expansion as we grow our revenues.

Our adjusted tax rate was 29.4% for the fourth quarter of 2020 and 26.2% on a full year basis. We continue to expect our full year adjusted tax rate will be within our targeted range of 26% to 28% going forward.

For the fourth quarter of 2020, we generated net income of $75 million and diluted EPS of $4.17, up sequentially and year-over-year, driven by higher revenues and an increased margin. Net income of $178 million for the full year of 2020 increased 67.2% and diluted EPS of $10.02 increased 36% compared to 2019, demonstrating the accretive impact of our acquisitions and strategic use of capital. The scale and operating leverage of our platform and capital-light trading approach allows us to generate significant levels of excess cash from operations.

Let me now turn to capital and dividends. Our capital and liquidity is strong and our leverage is low. We believe that our priorities for capital deployment remain aligned with our shareholders' interest.

Our primary objectives are to maintain our dividend policy of returning 30% to 50% of our non-GAAP earnings to shareholders on an annual basis, to repurchase shares on an opportunistic basis in order to offset dilution from annual stock grants and to deploy capital towards acquisitions that accelerate growth. While each of these levers have different advantages, given our proven track record, we believe our shareholders will benefit most in the long term by us continuing to deploy capital towards growth initiatives.

With respect to dividends, the Board approved a special annual cash dividend of $1.85 per share related to our full year 2020 results. When combined with the regular quarterly dividends paid during the year, totaling $1.25, the dividend for fiscal year 2020 will be $3.10 per share, a 38% increase year-over-year. In addition, the Board approved an increase to our quarterly dividend to $0.40 per share to be paid alongside the special annual dividend on March 12, 2021, to shareholders of record as of the close of business on March 3, 2021.

Overall, we are pleased with our record 2020 performance. The additions of Weeden and Sandler have added material scale and operating leverage to our business. To conclude, our business is exceptionally well positioned for growth, and we are confident in our ability to deliver on our long-term strategic objectives.

Thanks, and we can now open up the call for questions.

[Operator]

[Operator Instructions] And our first question comes from the line of Devin Ryan with JMP Securities.

[Devin Ryan, analyst]

Great. Maybe start here with a crystal ball question for you. Appreciate some of the outlook commentary, and I also understand it was a just terrific year for capital raising in both equities and fixed income. So with the high bar, but also appreciating that this year has started on a pretty good note, can we think that the M&A advisory kind of acceleration can offset that or how would you frame kind of the potential deceleration in capital raising after such a great year versus your M&A reaccelerating?

And then just kind of second part of that question and really what I'm getting at here is, you've added a lot of capabilities on the Advisory side. I think ECM or the Advisory kind of looked at normalized revenue levels around $400 million to $450 million, but with Sandler and the balance with TRS. Is there a way to think about kind of what the potential is in Advisory in a more normalized environment, assuming we're kind of moving back into something like that?

[Chad Abraham, executive]

Yes, Devin, I think that's a great question. And I guess I would start with Advisory. I think you're dead on. I mean, obviously, throughout the year, Q2 and Q3 were really weak for us in Advisory, after an okay start in and a very strong finish. But I would still characterize sort of the total advisory results as suboptimal for sort of the platform we've built by combining Sandler, adding Valence, the restructuring capability with TRS. Frankly, many of our teams being down somewhat for advisory.

So I think we're very optimistic that we could see some significant growth in the total advisory number as the year grows and are really excited about the platform. The pipeline, many of the good thing is going on there.

I do think, per your question, some of that will be offset with some very difficult comparables for ECM, the DCM business and both brokerage businesses and even public finance. All of that being said, the capital markets have started, this year, very strong in January. But I think to see some of those results, I mean, you'd have to have a crystal ball looking out this year to say, "Hey, is the most of the year are going to be strong?" And that's just hard to predict.

So I think you're looking at this the right way. We absolutely feel we've got a significant upside on the advisory business this year.

[Devin Ryan, analyst]

Okay. Terrific. And maybe we should just think about the $1 billion-plus investment banking overall is maybe the way to put it all together as kind of where you guys are going. Okay. Maybe one here for Deb just on the brokerage business, clearly, a great year there as well, and you guys are gaining market share and are benefiting from some of the acquisitions as well.

In the fixed income business, specifically, is it possible to kind of parse through the strength of 2020? And how much was the elevated volume versus just some of the unusual benefits of maybe market making positioning, given kind of big moves in markets because I'm assuming some of that may be difficult to repeat since that's material versus the volumes potentially would be off a bit, but it could remain still relatively healthy? So just trying to kind of think about the different components of the fixed income brokerage business.

[Debbra Schoneman, executive]

Yes. I would say, as you look at 2020, it was much less around positioning in any way and much more around just the volumes in the business and things that were going well, clients flush with cash, whether that was -- because the refinancing or prepay is coming through or banks not lending. So a lot of that strength really more driven by just what was happening in the marketplace, which, I think as we look out, it's -- again, the crystal ball is how long those conducive market conditions will stay in place.

The other thing I would say, if we think about the combination with Sandler and what we had hoped to see with the 2 businesses coming together, we're really starting to see synergies. We fully integrated those businesses. And seeing the complementary nature playoff, whether it's the strong municipals that legacy Piper had being sold into banks or a lot of the product strength in corporates and mortgages as well as derivatives, loan strategies, et cetera, being sold into the breadth of the legacy Piper client base. So those synergies are also driving what we've seen as upside.

[Devin Ryan, analyst]

Yes. Okay. Terrific. All right. Then maybe just one here for Tim to close out on the capital position. So obviously, I could see the increase in dividend special. So in aggregate, $3.10 in dividends over the course of the year, but earnings, I think, ultimately, probably ended up much better than anyone could have imagined 6, 9 months ago. And so I'd just love to get some thoughts around how you guys are feeling about the excess capital position today following some of these actions like how you're kind of coming out of 2020? And then just thinking about uses of capital, obviously, acquisitions have taken up some of the capital, you're going to continue to invest in growth. But just kind of where you are because it would still seem that there's a pretty healthy kind of excess capital standing point at this point?

[Timothy Carter, executive]

Yes, Devin, you're right. We continue to generate excess. I think, coming into 2020, we had certainly deployed a lot of that through Weeden, Sandler, Valence. So we were taking probably a more measured pace at how we were thinking about it. We stayed at the lower end of our dividend payout ratio this year, but it does put us in a good position to be able to deploy across the different levers that we talked about.

I think our bias continues to be to have capital to deploy in growth opportunities, and that's sort of at the top of the list. So we want to have the capital there to do that. But certainly, with the amount of cash and capital that we're generating, you can see what we did with the quarterly dividend starting to move that up thinking about where we end in the dividend payout range for this year. It could be a little bit higher and then still thinking about opportunities to buy stock. So in a good position, want to deploy to accretive growth opportunities as the #1 priority.

[Operator]

[Operator Instructions] Our next question comes from the line of Michael Brown with KBW.

[Michael Brown, analyst]

So I wanted to ask about Advisory first. So really strong fourth quarter results, and I just wanted to parse out the strength in the results there. So I'd appreciate if you could just share some color about how much was really from kind of pent-up demand from pre-COVID and just those deals kind of coming through and closing? And then how much was really from the deals that came during the recovery in M&A that began in the summer and fall as we think about maybe the split this quarter and then, of course, kind of a run rate as we think about kind of the early part of '21 here?

[Chad Abraham, executive]

Yes, Mike, I think that's a good question. We very much looked at that. And maybe just first, we frankly had strong advisory contribution across all of our industry teams. Financial services was, by far, the biggest advisory business in Q4, followed by health care. And then, frankly, very good quarter from our industrials and consumer and energy businesses.

Relative to how much was sort of pre pent-up demand, I would say, it's probably a little over half was related to deals that sort of restarted, were in the queue finished. But we definitely got some transactions done that once things started to improve in August and September, we got a bunch of stuff done in December. So I think it was honestly sum of both to drive that Q4 result.

[Michael Brown, analyst]

Okay. Great. And you noted that the backlog is strong, and so I was curious if you could characterize that relative to prior periods, and obviously with acquisitions, that makes it a little bit challenging. But is it better now than it was going into 2020? I think that was generally a period that was -- obviously, COVID was the real curve ball, but was a period that was expected to be very strong for the industry. So I'm just curious if current levels are kind of above that period and would also appreciate some comments on the health care and financial verticals specifically and how you think those could play out here in 2020 -- 2021?

[Chad Abraham, executive]

Yes. So I think for us, it depends on the various industry teams. I would say most of our industry teams have backlogs, at least, as strong as we entered in 2020. And in total, for us, obviously, that means our backlog is stronger than that because we've also added Valence and TRS and some new recruits in teams.

When you just parse through particular industry groups, we've got a fantastic backlog in health care and feel very good about the M&A. Here, we're going to have in health care. We also have some very good discussions in financial services. What I would say about financial services and M&A backlog is there's just a longer period from announce to close. So a lot of that momentum has really picked up in the last couple of months.

So how much financial services M&A we get done depends a lot on how much we get announced in the first half. But generally, across the board, the backdrop across our industry groups and even the stuff we've added, like with Valence, is quite strong. So as I said, we're pretty optimistic about the results for Advisory this year.

[Michael Brown, analyst]

Okay, great. If I could just ask one more on IB here. So the $1 billion target that you laid out there, I appreciate that update that certainly helps to have that guidepost out there. Can you just give me a little bit more color there? Does that have a time frame kind of associated with it or is it -- obviously, it is market dependent, so it may not -- may take time. But just curious how to think about what that time frame could be? And what market backdrop does that assume? And do you incorporate any other inorganic actions or bolt-ons when you think about that $1 billion or is that meant to be target for kind of what the existing Piper Sandler platform looks like today?

[Chad Abraham, executive]

Yes. What I would say is we've just found sort of in our investment banking organization. We find a lot of value for sort of setting these goals. I mean when I was first running banking, we had sort of set this goal for $500 million, and it took us a few years. When we did the Sandler acquisition, we felt like we had the investment banking platform that, in the next 2 to 3 years we could get to a $750 million banking platform. Frankly, it just happened a lot quicker than we thought.

And I think with just adding Valence, some of the investments we're making in Europe, adding the restructuring capability with TRS, the focus is on productivity. We feel really good about the $1 billion target. And I would say that's probably a few year out. Target is the way we think about that. And could that include some small team lift-outs or tuck-in acquisitions, yes. But it doesn't assume anything sort of major on the corporate development front. We really feel like with our -- what will be throughout this year $150 million -- or 150 managing directors. We've got the banking platform to drive that over the next few years.

[Operator]

Your next question comes from the line of Mike Grondahl with Northland Securities.

[Mike Grondahl, analyst]

Congratulations on the strong finish and the strong start. Chad, you mentioned a little bit about how you grew market share, and is there any vertical that -- or a couple of verticals that really stick out where you think you took more share than average?

[Chad Abraham, executive]

Yes. I would say, the -- we had a spectacular year in health care, primarily driven by our ECM business. We've had a very strong health care franchise for 20-plus years, and it's always been led by sort of market-leading M&A. I would say, within the ECM business, we've also always had a significant business.

But just going back 5 years, I'd remind you, we made a lot of investments in our biotech franchise, building out a much broader research platform, building out very specialized sales efforts in health care. We added a bunch of senior bankers. And so we absolutely -- and it was a spectacular market for the fee pool. I mean, the fee pool was up significantly last year. But even within that health care fee pool, we grew market share a lot. And I think it's the first time we've been in the top 5 for book running sort of IPOs and follow-ons in that entire health care market. So that's probably the one I would highlight for the most significant industry vertical market share gains.

[Mike Grondahl, analyst]

Any others that stick out over the course of the year in the fourth quarter?

[Chad Abraham, executive]

Yes. I mean, like I said, we had a strong fourth quarter in a lot of our verticals. We did, frankly, the vast majority of our industrials business in M&A in Q4. So we feel good about where we're headed there. But obviously, that was after a very slow Q2, Q3.

Financial services, as I said, was our #1 Advisory business in Q4. Really good combination of some larger deals closing, and we just did a significant amount of capital advisory business in Q4. And so if I was to point to a another really high market share great business, our financial services team does a majority of the transactions for community banks in debt capital raising, whether that's underwritten debt, private placement debt, however you want to look at it, we did a lot of volume in Q4 and have very high market share.

[Mike Grondahl, analyst]

Got it. And then your non-comp expenses were basically flat, 3Q to 4Q and, obviously, the revenue was up $100 million. So great leverage there. How do we think about those going forward? At this new revenue plateau, do you need to invest in the non-comp area much or how do we think about that as we go to 2021?

[Timothy Carter, executive]

Yes, Mike, I don't -- I wouldn't say there's a lot of investment that has to be done at these levels. I mean, we obviously think that the non-comps are going to gradually increase over this year. We just got, obviously, a lot of leverage on travel-related expenses, given COVID, and expect that we'll see those start to move. I mean, we -- net of reimbursed deal, $45 million, we've said sort of this range of $48 million to $50 million on a quarterly basis for 2021. Early on, I think it's certainly at the lower end of the range. And as the year goes, we expect assuming vaccines rollout and things start to continue to get better that we trend up towards more of the top end of that range. But outside of that, I don't see a lot of other change from a non-comp.

[Chad Abraham, executive]

So we can drive leverage from that.

[Mike Grondahl, analyst]

Got it. Yes, sure did it in 4Q. And then maybe lastly, Chad, what's 1 or 2 top priorities for you just headed into 2021?

[Chad Abraham, executive]

Yes. I think the biggest priority, while we're pleased that we had a good rebound in Advisory, we still think there's big opportunity for us, our average fee size. As markets got difficult sort of all through the summer and in certain industry verticals, it was hard to grow average fees when deals get difficult. We think there's a big opportunity to continue to grow our average deal size in M&A, continue to grow our average fee size, continue to drive productivity.

And then the big priority is making sure across private equity. We've built a really nice investment banking platform across a lot of industries. We want to get that sort of full leverage from the private equity community. In addition to making sure we capture all the opportunity with Valence in the chemical space, which we added last year and we're really excited about the early start we have with TRS. As you know, we haven't been a big player in the restructuring market in the past, and that's a big opportunity for us.

[Operator]

And there are no further questions in queue at this time. I'd like to turn the call back over to Mr. Abraham for some closing remarks.

[Chad Abraham, executive]

Okay. Thank you, operator. Let me close by, again, thanking all my employee partners for their hard work and dedication to our clients. We look forward to maintaining our strong momentum here in 2021. Thank you, everyone, and have a great day.

[Operator]

Ladies and gentlemen, this does conclude today's conference call. You may now disconnect.