Huntington stepped back, let Haberer's assets grow
2002 acquistion a model for banks, money managers
February 25, 2005
By Steve Watkins
swatkins@bizjournals.com
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Ed Haberer
CEO - Haberer Registered Investment Advisors.
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Three years ago this week, one of Cincinnati's larger independent money management firms agreed to sell to a regional bank.
And while officials at Columbus-based Huntington Bancshares Inc. and local manager Haberer Registered Investment Advisor Inc. said virtually nothing would change in Haberer's operation, people couldn't be blamed for being skeptical.
The track record of banks buying money management firms wasn't stellar, and local examples abounded of such deals leading to significant changes.
But three years later, Haberer is operating independently, Ed Haberer is still the CEO and the firm's assets under management have grown 20 percent to $600 million.
"We've had virtually no loss of clients, and we've kept our people," Haberer said. "Our objective was to make this successful for our clients and our staff."
Nineteen of Haberer's 20 employees remained with the firm after the sale. Its employees average tenure with the firm is 13 years, Haberer said.
From its side, Huntington has been pleased with the deal.
"I've been in the investment banking business for 24 years, and this has been by far the best acquisition I've been involved with," said Dan Benhase, who heads Huntington's private financial group.
Part of the reason is Huntington's hands-off approach.
We're still independent," said Don Keller, Haberer's president and chief investment office. "As entrepreneurial as our spirit is, it's best that we are left alone."
Huntington didn't try to integrate the operations or cut costs, Benhase said. It didn't want to mess with success.
"They were growing when we bought them, and we didn't want to change that," Benhase said.
Banks often cut costs and seek to gain efficiencies when they acquire money managers, Benhase said. That wasn't Huntington's plan.
"We wanted to make sure we weren't doing things to disrupt their operations," Benhase said.
Another difference in this deal, Benhase said, was his knowledge of the firm and Ed Haberer. He had known both for more than a decade before the deal was struck.
Haberer, who's now 61, has overcome client concerns at the time the deal was announced that he might be looking to retire.
"I told them that no, nothing has changed," Haberer said. "But they said, 'Show us.'"
It's clear three years later that Haberer wasn't selling to retire, Keller said.
Haberer's initial concern was that clients would worry about disruption. But he and his staff took steps to tell all clients the deal was happening before is actually was announced. That eased their minds.
The cross-selling and referrals that banks often look for when buying money managers have shown up more in Haberer referring clients to Huntington than the other way around, Haberer said. But that's slowly changing.
"Referrals to Haberer will increase as they get better known within Huntington," Benhase said.
Haberer's alignment with Huntington also gives it added resources. That helps when it comes time to dealing with regulatory compliance issues, Haberer said.
Other deals haven't fared as well locally. Experts point to Fifth Third Bancorp's acquisition of the Ohio Co. in 1998 and KeyCorp's purchase of McDonald & Co., which brought it local money manager Gradison & Co., as deals that didn't work as well for one reason or another.
"A number of banks bought institutions, and what they really did was strip the assets," Keller said.
The success of any acquisition of a money management firm depends on three keys, said Jim Miller, president of Cincinnati money management firm Bartlett & Co.
It's imperative that the buyer avoid overpaying, Miller said. That sounds simple, but many buyers can't resist temptation and pay too much to win a bidding war.
"Then you won't derive an adequate return on capital," Miller said.
That's when the parent company starts slashing expenses and changing the firm's character. Eventually, investment people leave, and so do clients.
Buyers also should keep any cost-cutting and synergies limited to the back office and technology, Miller said. That avoids harming the firm's relationship with clients.
And third, a revenue-sharing arrangement works best for both sides. That's how Bartlett set up its sale of Legg Mason in 1996. That leaves control of expenses with the money management unit.
"Whoever controls expenses really controls the company," Miller said.
Reprinted with permission from the Business Courier. ©2005, all rights reserved.
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