Bear Stearns' private client business could be diamond amongst the rough for new acquirers JP Morgan although keeping it in tact may be another thing altogether.

For around $270 million in stock, JP Morgan has acquired a solid Private Client Services business attached to a troubled investment banking firm.

Bear Sterns PCS comprises 500 investment professionals who provide transactional, wealth management and investment advisory services to high net worth individuals, according to the firm’s website.

PCS net revenues – part of the wealth management business – were up 15 per cent to $602 million for the 2007 financial year, compared to the previous corresponding period, according to Bear Stearns’ fourth quarter results.

The Capital Markets business, meanwhile, is where all the trouble resided in Bear Stearns, especially within its Fixed Income and Investment Banking divisions.

Whether Bear Sterns is able to extract the positives from the business and separate the negatives is unclear.

A spokesperson for JP Morgan, who was contacted by WealthBriefing, said it was too early to say where the Bear Stearns Wealth Management operations would fit within JP Morgan’s existing business.

However Bear Stearns Wealth Management was not totally immune from the rest of the firm’s woes. According to the fourth quarter 2007 financial results, its Asset Management revenues had also declined due to “write-offs associated with receivables from and investments in the hedge funds, and lower management fees related to proprietary hedge fund products.”

For the fiscal year the asset management business was down 32 per cent from $336 million in the prior year.

JP Morgan is believed to be setting aside $6 billion to cover potential costs of litigation stemming from the drop in Bear Stearns' stock value and severance costs, according to reports following the announcement of the acquisition on Sunday.

Reports immediately after the announcement of the sale indicated that Bear Stearns brokers are scrambling to flee the Wall Street firm.

Head hunters in the US said that a large number of Bear Stearns brokers were in discussions with clients and other wealth management firms ahead of the sale announcement.

US analysts have begun to question how many Bear brokers will want to be absorbed into JP Morgan's private client business, with reports that Morgan Stanley may be the main beneficiary of the fall out, along with Merrill Lynch, both of which are also said to be targeting UBS wealth management advisors at the moment, on denied rumours of a possible sale of the US arm.

It is thought that JP Morgan will give Bear brokers a large retention package, but this may not be enough persuade them to stay on, say observers.