WM holding company adds Main Line firm Davidson to its roster of affiliates. Boston Private Financial plans to buy 70% of Devon, Pa.-based Davidson Capital Management. When completed -- probably early in 2008 -- the acquisition will bring Boston Private's affiliate count to 15 and mark its first foray into a lucrative new market.

"The acquisition of Davidson allows Boston Private to enter the affluent Philadelphia Main Line area with a solid wealth-management organization," says Boston Private's chairman and CEO Timothy Vaill.

Local guide

The deal was shepherded by Davidson's incoming CEO Alvin Clay III, who was CEO of Jenkintown, Pa.-based multifamily office Pitcairn Financial until about a year ago. Boston Private hired Clay in the second quarter of 2007 to help it find a suitable entrée to the Philadelphia market, either through acquisition or, as a last resort, by starting a firm from scratch.

"Al was able to identify [Davidson] -- which he already knew from his long experience in the Philadelphia market -- and he was able to initiate a conversation that brought us to where we are now," says Jay Cromarty, head of Boston Private's eastern U.S. region. "We where certainly exploring the possibility of a de novo, but we prefer to acquire going concerns."

Davidson -- comprised of Davidson Investment Counselors, an RIA that manages equities and fixed income in house for individuals and institutions, and Davidson Trust Company, a fiduciary services provider to high-net-worth clients -- has been around in one form or another for more than 30 years and now has about $1 billion in assets under management. Once the deal with Boston Private is finalized, the whole firm will adopt the "Davidson Trust Company" name.

The agreement calls for Boston Private to pay half of the "total consideration" -- which hasn't been disclosed -- up front, and cough up the other half over a three-year period until it reaches 70% ownership. The amount of future payments depends on how well Davidson Trust Company performs over the next three years. The remaining 30% of Davidson will be owned by firm founder James Davidson, Clay -- who is coming in as an investor -- and the firms other senior executives.

Good and solid

According to Clay, Philadelphia's wealth-management market features a mix of the old money you might expect to find in a major urban center in the northeastern U.S. and a growing population of first-generation wealth creators: business owners, executives and professionals of various stripes.

"It's a nice mix that way," says Clay. "Almost like a balanced portfolio."

In terms of competition, the area includes a number of independent advisories -- including some nationally known multifamily offices -- and several wealth-management outfits affiliated with large banks and wirehouses. Still, says Clay, "no one player dominates the market -- and in that of course there's an opportunity for us."

But it may an opportunity predicated on making Davidson a more holistic wealth manager. Right now, Davidson looks like an old-line capital manager that focuses on coordinating the investment, tax and fiduciary elements of wealth management for its high-net-worth clients. And though that has proved a winning formula for many other firms, Davidson's asset growth over the past decade or so hasn't been spectacular. So -- and this is a guess -- next moves might include a move toward to include more non-propriety investment options.

Peter Rockefeller, a managing director of the New York-based investment bank Berkshire Capital, helped Boston Private and Davidson structure their agreement. He says that Philadelphia is a highly desirable wealth-management market but -- maybe for that reason -- one that's tough to buy into. Despite that, he says that Boston Private has found a "good, solid company" in Davidson.

Elizabeth Nesvold, managing partner of New York-based M&A consultancy Silver Lane Advisors. Davidson has the basic ingredients for a resurgence in its new leader, according to "If anyone can breathe new life into a business, it's Al Clay," she says. "He has the personality and the knowledge of the local market to make it happen."

In addition to Clay, Davidson will also benefit from having a local sister company that provides private banking services -- or it will if Boston Private stays true to form.

Clusters

Boston Private started out as Boston Private Bank & Trust (now an affiliate) before morphing in the mid 1990s into a holding company for private banks, private-client advisories and institutional money managers. On the wealth-management side, it likes to create "clusters" -- local-market matchings of affiliated wealth advisories with high-end depositories. Though affiliates in its clusters don't push their clients to sister companies, Walter Pressey, Boston Private's president, says the ability to make referrals benefits both firms -- and by extension the parent company.

Late this past summer Boston Private established a private-banking and trust presence in New York when one of its affiliates, Coral Gables, Fla.-based Gibraltar Private Bank & Trust, opened an office in Manhattan as a match with KLS Professional Advisor Group. This gives the company pairings of private-banking and high-net-worth advisory affiliates in New York to go with ones in or around Boston, San Francisco and Seattle. It's looking to complete clusters in the Los Angeles area, where it owns First Private Bank & Trust, in Gibraltar's stomping ground of metropolitan Miami, and now of course in greater Philadelphia.

But First Boston's Cromarty says it could take time to complete a Philadelphia cluster. That's because Boston Private is an opportunistic buyer that's as apt to move into new markets -- and he says the firm has its eye on Washington, D.C. among other areas -- as it is to make another move in a market it's already in. But he emphasizes that cluster building is an important part of Boston Private's wealth-management strategy.

Meanwhile Clay says he's "excited" at the prospect of working with James Davidson and the rest of the Davidson team. "They have built a great business over the past 30 years," he adds. "And its one that few people really know about -- so far." -FWR

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