Merrill set to acquire private bank First Republic

Thomas Coyle

29 January 2007

Wall Street giant sees the deal deepening its private-banking capabilities. Merrill Lynch has agreed to pay $1.8 billion for San Francisco-based First Republic Bank, a prestigious private-banking firm focused on high-net-worth individuals and their businesses. Merrill says the transaction -- and the subsequent extension of First Republic's geographic base from its present, and mainly Californian, footprint -- will enhance its own wealth-management capabilities.

"We expect our entire private-client organization to benefit from high-net-worth offering," says Nesvold. "In both instances, it's a matter of acquiring what the buyer might be hard pressed to build successfully de novo."

In a similar deal -- though perhaps rather more a combination of equals -- the Bank of New York recently agreed to acquire Mellon Financial, in part to tap into an impressive private-client pipeline Mellon has built up over the past 12 years through pin-point acquisitions of its own.

Alois Pirker, an analyst with the Boston-based consultancy Aite, agrees with Nesvold. "Build or buy is the question in the wealth-management industry today," he says. "The strategy of the big firms seems to be to grow organically where possible, but to buy where ever there is a franchise that allows making a leap forward."

Perhaps in keeping with its size and clout as a Wall Street mainstay, Merrill is a force on the M&A landscape. It sold its $544-billion in assets investment-management unit to Blackrock last year in the second-biggest deal of its kind. (The Bank of New York's acquisition of Mellon rates as the biggest.) Late in 2005 it bought AXA Financial's Advest subsidiary. Other recent grabs include pieces of various hedge funds of funds and a couple of emerging-market wealth firms.

Merrill says it expects to complete the First Republic transaction by the end of September 2007. -FWR