BY URSULA MILLER
The Cincinnati Enquirer
KeyCorp.'s $580 million stock and cash purchase of McDonald & Co. Investments Inc. will close today, marking the most recent in a wave of bank-broker marriages.
Cleveland-based Key got approval Wednesday from the Federal Reserve Board to proceed with its purchase of McDonald, a 74-year-old investment banking and brokerage firm also based in Cleveland. Key's purchase of McDonald follows Fifth Third's takeover of the Ohio Co. in Columbus in June. PNC Bank's purchase of Hilliard Lyons in Louisville is set to close Nov. 30.
No job losses are planned as part of the McDonald acquisition, officials at McDonald and Key said. McDonald has 1,500 employees, including 200 in Cincinnati -- its biggest operation outside Cleveland.
Key also promises to leave McDonald alone to operate as an autonomous subsidiary, an unusual move for a bank, said Michael Flanagan, an independent securities industry analyst in Philadelphia.
"I think KeyCorp would do best to let McDonald continue running its own show because those acquired brokerage firms that have been allowed to run independently have fared the best," Mr. Flanagan said.
Some tweaking is in the works. For example, McDonald's new name will be McDonald Investments, and a gold key logo will appear in signage.
Little more than management changes are expected in Cincinnati, said Brad Turner, managing director of Gradison-McDonald Asset Management downtown. The Gradison-McDonald name remains, he added.
"Ironically, the only change actually relates to me," Mr. Turner said. "That is, I've been asked to go back to Cleveland to run what's called the Wealth Management Unit."
Wealth Management is Key's investment management business for its highest net-worth clients with assets of at least $5 million. Steve Dilbone, who has been a money manager focused on municipal bond portfolios for Gradison-McDonald, takes over for Mr. Turner.
Key's Cincinnati brokerage operation stands to benefit greatly from the McDonald acquisition.
"They go from being a small market-share player in Cincinnati to having a dominant asset management and mutual fund presence in Cincinnati," Mr. Dilbone, 39, said.
The Gradison-McDonald brokerage division has 63 brokers spread among three offices in the Tristate. Key, by comparison, has only six or seven, said Richard Curry, who oversees Gradison-McDonald's local retail brokerage business.
Gradison-McDonald in Cincinnati manages $2.5 billion in assets for individuals and another $3 billion in mutual funds. (McDonald bought Gradison, an old-line Cincinnati money management and brokerage firm, in 1991.)
Key also hopes to leverage the McDonald name for its entire brokerage operation by dropping the Key Investments name in favor of McDonald Investments -- another unusual move for a bank acquiring a brokerage.
Culture clashes between banks, which tend to be more cost-conscious and authoritarian than brokerages, have often resulted in troubled mergers, Mr. Flanagan said.
"I think McDonald-KeyCorp has good potential," he added. "They're going into the deal with the right outlook and perspective."
