Boenning & Scattergood, one of the last remaining traditional investment banks and brokerage firms in the Philadelphia area, is considering restructuring or selling parts of its business, according to people familiar with the company.
The 108-year-old firm, which handles about $2 billion in client money from its offices in West Conshohocken, employed more than 150 investment bankers, stock analysts and salespeople as recently as the mid-2000s. it has had less than half that number in recent years, according to staff.
Boenning is one of the last of what was once a thriving industry of independent, regional investment banks, which raised funds for businesses and helped their owners and other wealthy individuals and institutions invest their money.
But market changes have dramatically reduced brokers’ stock trading commissions, and reforms after the 2008 collapse have made several Boenning firms and those of its peers less profitable, forcing many to sell trades to rivals. more important. Wall Street firms struck more and more financing deals, while investors left to take advantage of lower investment fees at Vanguard, Charles Schwab and others.
In a memo this spring, Boenning Chairman Harold F. Scattergood Jr., 74, the third generation to be the company’s principal owner, told employees he was in talks with a national company. which he did not identify who would make Boenning’s brokerage unit his home. affiliate.
Separately, members of Boenning’s investment banking group – which raises money for businesses and is headed by Charles “Chad” Hull – are said to be forming a new company, which would join the handful still operating in the region. Hull did not return requests for comment.
Help us improve our Business coverage for you: We may change some parts of the Companies section and need your help. Take Our Anonymous Survey and You Can Enter to Win a $75 American Express Gift Card.
Boenning’s Institutional Trading Group has also been in talks with local giant Janney Montgomery Scott, a brokerage and investment bank owned by Horsham-based Penn Mutual Life Insurance Co. behalf.
Janney’s spokesperson, Bradd DelMuto, said in a statement that “in the normal course of business, we frequently have discussions with professionals who are interested in joining Janney. We have no further comments at this time. »
A restructuring or sale of Boenning, if it occurs, would make it the latest in a series of Philadelphia investment banking firms that have realigned in response to changing business conditions that have rattled regional banks.
It also marks the final turning point in a turbulent history. Henry Doer Boenning founded Boenning & Co. in 1914, the year World War I began.
Harold F. Scattergood Sr. joined as a stock trader in 1935. Boenning died in 1943, and Scattergood Sr. became senior partner four years later. In 1969 the company incorporated as Boenning & Scattergood, combining the names. And Harold F. Scattergood Jr., who joined the company in 1970, was named president in 1985.
For much of its history, the company focused on local banks, insurers, utilities and other regional businesses that preferred to deal with bankers who could meet their needs.
Its research analysts have cultivated niche industries—the nation’s major water utilities are both based in suburban Philadelphia, and Boenning analysts have often visited them and written authoritatively about their business prospects. agreement, as they did on Mid-Atlantic bank mergers and Pennsylvania ownership issues. insurers. The company’s stock research prompted niche investors to send Boenning their trades, while Boenning’s bankers sought corporate bond sales and other funding.
Longtime Boenning owner Scattergood, 74, has reached the age where an owner often wants to step back and sell the property, especially if the next generation is not involved in the business, people said familiar with the business and the family.
A potential buyer for Boenning’s brokerage business is LPL Financial Holdings Inc., a national company that has acquired numerous local brokerages, according to multiple industry sources.
Joseph Muscatello, head of the public finance team at Boenning, which sells bonds for governments, moved to Stifel this year, according to industry records. Stifel, a national company based in St. Louis, has strengthened its presence on the East Coast. Muscatello did not respond to a call or email for comment. The firm’s capital markets team, meanwhile, continues to argue with several suitors.
Investment banking is “increasingly emphasizing scale and expertise. It’s pushed smaller companies to consolidate,” said Andrew Greenberg, founder of GF Data in Conshohocken, which tracks M&A activity in the space.
“It’s a tough time for these small businesses,” Matt Taylor said, commenting on Boenning’s outlook.
Mimi Drake, Adam Landau and Taylor recently merged their company Permit Capital with Cerity Partners, which manages approximately $50 billion in assets.
Permit, of West Conshohocken, handles money for families and high-net-worth individuals, and merged last month amid rising compliance and cybersecurity costs. The agreement expands Cerity’s reach to 15 US markets. Terms were not disclosed.
“You’ve got to get fat, or you’re going home,” said Howard Trauger, president of the Bond Club of Philadelphia and founder of former investment firm Schuylkill Capital Management, which he sold to Cleveland’s Carnegie Investment Counsel in 2015. .
Trauger sold amid challenges raising enough capital from investors to fund a larger staff, just as more Americans turned to online brokers and index funds such as those sold by Vanguard Group of Malvern and Charles Schwab.
He said the lack of heirs could also be a factor in Boenning’s deliberations. “It’s about the aging of upper-level people,” with few young people ready to inherit stores, Trauger added. He also said increased regulation has the effect of making securities research unprofitable as a sales tool.
“It all comes down to who is going to pay for the research,” Trauger said. “With the Internet, you don’t need those road trips anymore where you meet potential clients in every city, discuss your best ideas and try to get them to invest with you. I get research from JPMorgan and CFRA every day. I can press a button on TD Ameritrade Institutional Services and get all the research I need.
Banks have also been taken over, including Citizen’s purchase of HSBC’s retail banking business and WSFS’s purchase of Bryn Mawr Trust, at 2.3 times tangible book value, the main valuation measure used by banking analysts such as Eric Boenning & Scattergood. Swick.
“Community banks tend to go for a slightly lower price of 1.3 to 1.5 times tangible book value, and larger banks 1.5 to twice,” Zwick said.
Wall Street giant Raymond James (ticker: RJF) has also completed the purchase of Tristate Capital Holdings, a niche Philadelphia securities lender and middle-market commercial bank, for $1.9 billion, or about 1.9 times tangible book value, Boenning Bank analyst Eric Swick estimated. The deal was brokered by local private equity firm Lovell Minnick Partners in Radnor.
“We have two business segments, commercial banking and an investment management segment,” said Brian Fetterolf, president and CEO of TriState Capital Bank. Approximately 70% of TriState’s business consists of securities lending, through relationships with independent advisors who lend to clients secured by their investment accounts.
“We have seen 20% year-over-year growth and we work with high net worth individuals, select businesses and financial institutions. But the opportunity with Raymond James provided a very secure business,” Fetterolf said.
TriState will remain a separately chartered bank. Chartwell Investment Partners, the investment management arm of TriState, will complement Carillon Tower Advisers from Raymond James.
Each common share of TriState Capital was converted into $6.00 in cash and 0.25 common shares of Raymond James, or $30.62 based on the closing price of Raymond James stock on May 31. Shares of TriState Capital ceased trading on NASDAQ.
Fulton Financial completed the purchase of Philadelphia-based Prudential Bancorp this year, to expand into a fast-growing metropolitan market beyond its central Pennsylvania niche at a price of 1.1 times tangible book value, estimated Zwick.
And last year, Spouting Rock Asset Management signed a joint venture with Bell Asset Management of Australia, acquired a minority stake in Glovista Investments and completed a majority investment in Penn Capital. Spouting Rock named a new CEO, Marc Brookman, in May. The Philadelphia-based investment firm run by former Aberdeen co-manager Andrew Smith.
From the perspective of a longtime traditional banker, “it’s more or less the same,” said Jim Dever, president of Greater Philadelphia operations at Bank of America. “I have witnessed many consolidations in thirty years of activity. But those behind the latest round of banking transactions are doing so in a different and rising rate environment,” he said.