Cleveland merger may set the stage for acquisitions in other U.S. cities. In its first acquisition in five years, Northern Trust is set to buy Lakepoint Investment Partners, a Cleveland, Ohio-based asset manager to high-net-worth investors. The deal stands to double the Chicago-based trust company's presence in northeastern Ohio and serve as a model for selective buys in U.S. markets.

The deal, which is expected to close later this summer, came out of a cold call from Northern Trust to Lakepoint's co-owners Mary Ann Laughlin and Douglas Wang about a year ago. "That resulted in a meeting with someone from Northern Trust we'd never met before, and it just went from there," says Laughlin.

Critical mass

Though Northern Trust sees organic expansion as its primary engine of growth in wealth management, Sherry Barrat, co-president of Northern Trust's Personal Financial Services (PFS) division says "it's highly possible that that we could undertake one or more [acquisitions] in the next two years. We're looking at opportunities to become more focused in markets where we already have a presence, particularly where we have only one office."

PFS has 85 offices in the U.S. including 25 in Florida, 19 in Illinois, 11 in California, eight in Arizona, seven in Texas, three in Michigan and, counting Lakepoint, two in Ohio. Its one-office markets are Seattle, Las Vegas, Denver, Minneapolis, Milwaukee, St. Louis, Mo., Atlanta, Wilmington, Del., New York, Stamford, Conn., and Boston.

The point of buying a respected firm in a markets where the acquirer has no presence or else only a small office is that it can be "easier to get more critical mass with a partnership," says Elizabeth Nesvold, managing partner of New York-based M&A consultancy Silver Lane Advisors.

In any case, to the extent that Northern Trust is now more open to buying firms, it seems to be more a function of internal strategy than a reaction to M&A market conditions. Though activity seems to have slowed in recent months, "good firms are still going for historically [high] prices," says Scott Ketner, a managing director of the New York-based investment bank Berkshire Capital.

Northern Trust's last PFS buy was of Legacy South in 2003. Acquiring the then-$300 million-in-assets firm marked PFS' entree to Atlanta -- one of the fastest-growing high-net-worth markets in the U.S. Before that -- going back to early 1990s in some cases -- it has acquired banks, investment managers and advisories in Florida, Texas, Colorado and California.

Cleveland may be less of a growth market than Atlanta and some of the other places in which Northern Trust has purchased firms or established de novo offices, but the Midwestern city is a regional hub and "clearly in [the trust company's] footprint," says Ketner.

More to offer

And deepening that footprint is precisely why Northern Trust is buying Lakepoint. Although the all-propriety manager's large-capitalization growth equity and investment-grade fixed income offerings make a welcome addition to Northern Trust's in-house platform, acquiring Lakepoint is mainly an opportunity for Northern provide more services to its client base, according to Barratt.

Michael Cogan, president of Northern Trust's operations in Ohio, agrees. "Our partnership will provide expanded investment resources to Lakepoint's clients and allow them to take advantage of Northern Trust's banking services and trust capabilities," he says.

Lakepoint manages $586 million across about 200 relationships ranging in size from "many millions to under half a million," says Laughlin. Its private-client base is a mix of new-wealth creators and legacy-wealth holders for whom, in many cases, Lakepoint is their sole investment manager.

Right now, Lakepoint clients turn to a variety of providers for banking services including regional leaders like National City and KeyBank.

Through PFS, Northern Trust provides private- and business-banking, investment-management, trust, financial-planning, philanthropic, retirement-planning and brokerage services to clients with at least $1 million in investable assets.

PFS' Private Client group targets those with between $1 million and $5 million. Wealth Advisory is for clients with between $5 million and $200 million. At the high end of the Wealth Advisory spectrum, PFS offers outsourced family-office services through Family Advisory. And PFS' Wealth Management group provides support services to single-family offices with at least $200 million in assets.

So for Lakepoint, the tie-in with Northern Trust "strengthens what we can offer," says Laughlin. "It gives us the ability to provide our clients a broader array of services."

When the deal with Northern Trust is completed, Laughlin, Wang, portfolio managers Joseph Thomas and Michael Wagner and the rest of Lakepoint's professional and support staff will join Northern Trust, moving into PFS' existing office about two blocks from Lakepoint's present location.

The Lakepoint brand will disappear.

Northern Trust PFS managed $146 billion at the end of March 2008. -FWR

Purchase reproduction rights to this article.