Boston Private Financial Holdings Inc. said Monday that it has a $30 million agreement to buy an 81% stake in KLS Professional Advisors Group Inc., a move intended to expand its New York operations.
The definitive purchase agreement would add to Boston Private's existing business in New York, an 80% interest in Dalton, Greiner, Hartman, Maher & Co. LLC, a small-cap value investment manager. KLS is a wealth management firm with about $2.7 billion of client assets under advisement. It specializes in investment management, insurance, retirement planning, estate planning, and income tax planning services.
Walter M. Pressey, the president and chief financial officer of Boston Private, said in an interview that his company's strategy is to replicate its success in the Boston market in other geographic areas.
"All businesses are pushed by demographics," said Mr. Pressey, and Boston Private has seen a lot of business formation in New York. "New York is one of the top four markets out there," he said.
Boston Private focuses on private banking, wealth advisory, and investment management services. It had $2.8 billion of assets under management at June 30.
About 90% of the deal's initial purchase price is to be paid in cash and the remainder in Boston Private common stock. The deal is expected to close this quarter. Boston Private also has agreed to buy the remaining 19% of KLS within five years.
Boston Private markets and distributes its services in New England, Northern and Southern California, New York, and the Northwest, said Mr. Pressey. Seven other areas are attractive to both Boston Private and the whole high-net-worth industry, he said - South Florida, Atlanta, the District of Columbia and Northern Virginia, Philadelphia, Chicago, Denver, and Austin, Tex.
If it chose to expand in any of the latter areas, it would try to do so through similar deals, he said. "We enter new markets through an acquisition because the business is very personal," he said.
"Products and services are commodities, but relationships are a key ingredient to success," he said.
Regarding sales goals, Mr. Pressey said Boston Private expects every one of its units to achieve 15% compound annual growth during a five-year period.
Boston Private went ahead with the KLS deal primarily because of its management team, which will stay on board, Mr. Pressey said. "It's all about the people," he said. KLS also is well positioned to offer Boston Private's services and does business in a very attractive area, he added.
KLS, which was founded in 1989, is an independent registered investment advisory firm in midtown Manhattan. It is managed by four principals, Carlton B. Klapper, Arthur N. Langhaus, Robert M. Schorr, and Alan J. Brod.
Timothy L. Vaill, Boston Private's chairman and chief executive officer, said in a press release, "KLS secures for us a strong linkage with the high-net-worth community both in New York and elsewhere across the country, and it also contributes to our revenue diversification strategy by increasing our recurring fee income."
Mr. Schorr, a KLS managing director, said in the same release, "We consider this partnership with Boston Private to be an excellent way to expand our strategic business model and achieve continued success and growth as a wealth adviser. We are experienced leaders in the high-net-worth community, and we look forward to helping Boston Private expand its regional presence in New York."
Boston Private assists its affiliates with strategic matters, marketing, compliance, and operations.
