Boston Private Financial Holdings Inc., which has said for some time that it planned to expand into northern Virginia, Atlanta, Dallas, Chicago, and Denver, is widening that plan.
"We haven't changed our strategy, we've just refined it," said Joseph H. Cromarty, Boston Private's president for the Eastern region. "We've slightly altered our execution, but the strategic plan is the same: We want to find firms in attractive markets with the right values and attributes that we are looking for."
This means acquiring private banking and wealth management firms in more markets, Mr. Cromarty said Tuesday, when Boston Private announced it was buying the Philadelphia wealth manager Davidson Capital Management.
Boston Private continues to seek opportunities in all of its traditional target markets, but Southern California (specifically around San Diego), Atlanta, parts of Texas, and Chicago have become "high priority" regions for the company to make more acquisitions, he said.
"We are clearly not spending equal amounts of time and money researching every market," Mr. Cromarty said. "There are markets that fit in a higher tier."
Boston Private has 14 affiliates that focus on private banking, investment management, and financial planning in New England, New York, Florida, the Pacific Northwest, and Northern and Southern California.
The company's strategy for growth has been simple and effective for the past 13 years: It establishes regional hubs by acquiring a wealth manager and a private bank, and then opening offices in the region.
Boston Private, which had $37.2 billion of assets under management on Sept. 30, closed two deals in the third quarter.
In July it bought Charter Financial Corp., a Bellevue, Wash., private banking company, and in August it increased its stake in Bingham, Osborn & Scarborough LLC of San Francisco and Menlo Park, Calif., to 60%.
Boston Private closed an initial 20% investment in Bingham Osborn in February 2004 and bought additional 10% positions in August 2004, 2005, and 2006. Bingham Osborn, which specializes in strategies for retirement and estate planning, charitable giving, portfolio diversification, insurance programs, and tax management, has $2 billion under management.
Mr. Cromarty said market conditions have not accelerated the firm's strategy.
"We have been quoted publicly for the past year saying that we plan to do about two acquisitions each year," Mr. Cromarty said. "That is the strategy that we have laid out with the board and the board has endorsed. We are moving roughly at that pace."
Davidson Capital includes Davidson Trust Co. and Davidson Investment Counselors.
Mr. Cromarty said Boston Private began seriously considering making an acquisition to expand into the Philadelphia market in the second quarter, when it hired Alvin A. Clay 3rd, a veteran Philadelphia wealth management executive.
Mr. Clay, who had been the president and chief executive officer of Pitcairn Financial Group in Jenkintown, Pa., for 14 years, began to explore opportunities for Boston Private to make an acquisition or expand with a de novo strategy in Philadelphia when he joined the company, Mr. Cromarty said.
His history in the area "certainly accelerated" Boston Private's interest in the region, Mr. Cromarty said.
The hiring of Mr. Clay and the deal his hiring helped bring about were an unusual set of events that would be difficult to reecreate in another region, Mr. Cromarty said.
"This doesn't mean we won't try to replicate this method in other markets," he said. "But this will not be the consistent way that we enter new markets."
Davidson Trust sells investment services to wealthy clients; Davidson Investment Counselors is an equity and fixed-income manager. Davidson Capital Management had $1 billion of assets under management on Nov. 1.
In other markets Boston Private has acquired private banks soon after buying wealth managers, but its strategy in Philadelphia is still a work in progress, Mr. Cromarty said.
"Clearly our model in each region has been to have a private bank and an investment management firm working together," he said. "But as for what shape and form we will use in Philadelphia, it is still a bit too early to tell. Our focus for now is to close this acquisition. … It is hard to say when and where our next private banking platform may manifest, but it is desirous to have private banking in that region."
Analysts said growth can take time for a company that relies on acquisitions as its primary way to enter new markets.
Mr. Cromarty agreed. He said that Boston Private's acquisitions over the past several years have required "very long gestation periods," so it continues to augment its buyouts with organic growth.
He said that Boston Private wants to continue to expand organically on the East Coast, specifically in New England, New York, and Florida.
In 2006 it opened offices in New York; Naples, Fla.; and Lexington and Hingham, Mass. It said during its third-quarter earnings call that it had opened four offices this year, though it did not say where.
The Davidson deal, which is expected to close next quarter, is projected to be accretive to Boston Private on the basis of generally accepted accounting principles within 12 months and immediately accretive on a cash basis. Davidson Trust and Davidson Investment Counselors are to become one firm, Davidson Trust Co.
Boston Private would buy a 70% interest in Davidson Trust. The remaining 30% would be owned by Mr. Davidson, Mr. Clay, and other senior executives of Davidson Capital. Boston Private is to pay 50% of the total consideration at closing and the remaining 50% over three years. The amounts of the future payments are to be tied to Davidson Trust's growth.
The price of the deal was not disclosed.
