Monday's purchase of McDonald & Co. added considerable heft to KeyCorp's investment banking and brokerage businesses.
The $580 million transaction brought 97 new investment bankers and 422 stockbrokers to the Cleveland-based banking company.
All told, KeyCorp now has 127 investment bankers and a retail sales force of 712 brokers.
But analysts noted that the deal could not have closed at a worse time, given the recent stock market downslide.
On the whole "it's a positive transaction," said Diana P. Yates, an equity analyst with A.G. Edwards & Sons of St. Louis. "Unfortunately it closed at a time when there's some capital markets weakness."
In fact, stock market volatility would have ordinarily raised the prospect that the transaction would have to be called off. However, KeyCorp executives said, the agreement was written in such a way as to prevent a lower share price from killing the deal. The deal was originally valued at $653 million.
With the transaction complete, $77.7 billion-asset KeyCorp is set to fold McDonald & Co. into a newly configured Key Capital Partners, the division that oversees brokerage, capital markets, and asset management.
KeyCorp's brokerage unit will be renamed McDonald Investments and incorporate the red Key logo in its name. The unit is to comprise the company's retail brokerage, investment banking, and institutional capital markets arms.
Key Asset Management, KeyCorp's asset management unit, which includes its mutual funds and insurance business, will retain its current moniker. With the acquisition, KeyCorp now manages $68 billion of assets.
The acquisition "allows us to really be a one-stop shop," said William B. Summers Jr., former chairman of McDonald & Co., who is now chairman of Key Capital Partners.
R.B. "Yank" Heisler, who had been executive vice president for Key Capital Partners, has been named president of Key Capital with responsibility for asset management. Robert T. Clutterbuck, who had been president and chief operating officer of McDonald Investments, has been named vice chairman of Key Capital and is to have responsibility for McDonald Investments.
Thomas M. McDonald, who was a senior managing director at McDonald's private client group, is to head the retail brokerage operation of McDonald Investments. Mr. McDonald succeeds Jack Kopnisky, who has been promoted to the role of president at KeyBank NA.
Mr. Kopnisky, in turn, succeeds Robert Jones, who has taken on the post of president of Key Services, the bank's operations unit.
Mr. Kopnisky said he sees the acquisition as an opportunity to "synthesize product offerings." In his new position, he said, he would seek to sell mutual funds, securities, and insurance products to retail banking customers.
Mr. Summers said, "Clearly the cross-selling opportunities are what drives these kind of mergers."
Observers applauded KeyCorp's ability to cross-sell.
Kevin T. Timmons, an equity analyst with First Albany Corp., said combining the two Cleveland-based companies "makes perfect sense." However, Mr. Timmons said, it remains to be seen whether KeyCorp's integration of McDonald & Co. will be a success.
Mr. Summers said that he expects no problems, and that layoffs would be minimal. Most of the overlap is in the support area, he said. Attempts will be made to place redundant employees elsewhere in the organization, he said.
