Where Boston Private Financial stands after selling one of its last original acquisitions for $10.5 million

Bryn Mawr Trust Co. is purchasing Davidson Trust Co., one of the last few remaining advisory firms originally rolled up by Boston Private Financial Holdings Inc.

Bryn Mawr is paying Boston Private $10.5 million for Devon, Pa.-based Davidson Trust — $7.35 million in cash at the closing, which should occur in the second quarter, and the remainder to be paid over an 18-month window based on retention of assets.

Davidson is bringing over about $1 billion in assets, raising Bryn Mawr’s assets to about $6 billion in assets. See: This generation of advisor aggregators puts the roll-up ghosts to bed, for now.

The deal brings together two like-minded firms, says Frank Leto, head of wealth management division for Bryn Mawr.

“They have a very similar model to ours,” Leto says. “This brings additional investment expertise and gives us a great opportunity to cross-sell from the bank to their clients things like mortgages and private banking services.”

Unrolling

While the deal promotes growth for Bryn Mawr, it continues a pattern by Boston Private to contract its businesses in recent years. See: The seven things I learned from roll-up executives in Princeton, including not to call them that.

Dan Inveen: Boston Private’s rough patch
seems to have subsided.

Boston Private was one of the industry’s first roll-up firms known for an aggressive buying spree in the early 2000s but when the economy slowed, it began rapidly selling firms just as fast.

In 2008, Boston Private had 15 affiliates but since 2009 it has sold off Coldstream Capital Management, Westfield Capital Management, Gibraltar Private Bank & Trust Co., Sand Hill Advisors, Boston Private Value Investors and RINET Co.

Now, Boston Private has just five affiliates, including one created when four private banks merged into one — Boston Private Bank & Trust Co. — as of May 2011. On the wealth-management side, Boston Private still owns two wealth advisory firms — Bingham, Osborn & Scarborough and KLS Professional Advisors Group. And the firm still owns investment management companies Anchor Capital Advisors LLC and Dalton Greiner Hartman Maher & Co. LLC.

It appears that Boston Private had gained solid footing after some tough times, according to Dan Inveen, principal of FA Insight.

“When the financial downturn hit, they had to start retrenching fairly quickly because they had some balance sheet concerns and they sold several firms in 2009,” he says. “After the financial market meltdown, they had a rough patch but it seems to have subsided.”

Smaller yet bigger

“We believe that our current roster of affiliate companies is well-positioned for growth,” says Jeanne Hess, a spokeswoman for Boston Private, adding that Boston Private’s net income was $39 million in 2011 despite an $8 million one-time restructuring charge associated with the consolidation of the banking entities. She says that excluding the restructuring charges, the company’s net income is still 85% of what it was at the company’s 2006 peak in income. The firm’s assets at the end of 2011 were $6 billion.

“Although we have fewer companies than we did in 2006, our overall asset size is actually slightly larger,” says Hess. “We believe we are a more unified and efficient company now, with a stronger capital base to help prosper in a variety of market conditions. Boston Private continues to focus on providing private clients with high touch service in all of its markets, through its private-bank, wealth advisory and investment management affiliates.”

Ten minutes away

Hess says Boston Private sold Davidson to Bryn Mawr because the trust company made a negligible contribution to the company’s bottom line and noted that Philadelphia market is not part of her firm’s strategy and that it has no banking presence there.

But Davidson’s location just 10 minutes from Bryn Mawr banking offices is ideal, says Bryn Mawr chairman and chief executive Ted Peters.

He says Davidson’s business has about 20% trusts and about 80% investment management while his firm has focused more heavily on trusts.

“The bank is not growing as fast as it did four or five years ago,” Peters says. “Everything we do, we’re looking for synergies. At Davidson Trust, they didn’t have access to deposit services right in the community and they will now through us at Bryn Mawr.”

Strong pipeline

Leto, who says that his firm intends to keep the 28 employees of Davidson, believes there’s strong potential to build assets through Davidson Trust. “They’re growing and have a strong pipeline,” he says.

The big benefit Davidson sees is the opportunity to cross-sell and offer bank services to the Davidson clients. Right now, Davidson has about 1,000 accounts and about 350 relationships, many of whom are longtime clients.

This is the third acquisition Bryn Mawr has made in recent years. In 2008, it bought Lau Associates, an RIA based in Wilmington, Del., for about $15 million. Last year, the firm bought Hersey Trust Co. for $18.3 million.

Leto says there are a number of back-office technology issues the company will have to finalize. For instance, Davidson used Advent Software and SEI Advisor Network but his company uses SunGard WealthStation exclusively. He says it will take the company a number of months to make a final decision about technology.