Boenning & Scattergood, one of Philly’s last investment banks, moves to restructure or sell off parts of the firm, sources say

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Boenning & Scattergood, one of the Philadelphia area’s last traditional investment banks and brokerages, is exploring a restructuring or selling off pieces of its business, according to people close to the firm.

The 108-year-old firm, which manages about $2 billion in clients’ money from its offices in West Conshohocken, employed more than 150 investment bankers, stock analysts, and salespeople as recently as the mid-2000s. But it has had fewer than half that number in recent years, according to staff.

Boenning is among the last of what was once a thriving industry of independent, regionally based investment banks, which raised money for companies and helped their owners and other wealthy people and institutions invest their money.

But market changes deeply reduced brokers’ stock-trading commissions, and reforms after the 2008 meltdown made several of Boenning’s businesses and those of its peers less profitable, forcing many to sell operations to larger rivals. Wall Street firms grabbed ever more financing deals, while investors departed to take advantage of the cut-rate investment fees at Vanguard, Charles Schwab and others.

In a memo this spring, Boenning chairman Harold F. Scattergood Jr., 74, the third generation to serve as the firm’s lead owner, told employees he was in discussions with a national firm he did not identify that would make Boenning’s brokerage unit its local affiliate.

Separately, members of Boenning’s investment banking group — which raises money for companies and is headed by Charles “Chad” Hull — is said to be forming a new firm, which would join the handful still operating in the region. Hull did not return requests for comment.

Boenning’s institutional-trading group has also been in talks with local giant Janney Montgomery Scott, a brokerage and investment bank owned by Horsham-based Penn Mutual Life Insurance Co.. Industry sources declined to be identified because they were not authorized to speak on the company’s behalf.

Janney spokesman Bradd DelMuto said in a statement that “in the normal course of business, we frequently have discussions with professionals who are interested in joining Janney. We have no further comment at this time.”

A Boenning restructuring or sale, if it occurs, would make it the latest in a string of Philadelphia investment banking firms that have realigned in response to changing business conditions that have convulsed regional banking.

It also marks the latest turn of a storied history. Henry Doer Boenning founded Boenning & Co. in 1914, the year that World War I began.

Harold F. Scattergood Sr. joined as a stock trader in 1935. Boenning died in 1943, and Scattergood Sr. became senior partner four years later. In 1969, the firm incorporated as Boenning & Scattergood, combining the names. And Harold F. Scattergood Jr., who joined the firm in 1970, was named chairman in 1985.

For much of its history, the firm focused on local banks, insurers, utilities and other regional firms that preferred to deal with bankers who could meet their needs.

Its research analysts cultivated niche industries — the nation’s leading publicly held water utilities are both based in suburban Philadelphia, and Boenning analysts visited them often and wrote with authority about their deal prospects, as they did about mid-Atlantic bank mergers and issues affecting Pennsylvania property insurers. The company’s stock research enticed niche investors to send Boenning their trades, while Boenning bankers sought the companies’ bond sales and other financing.

Boenning’s longtime owner, Scattergood, 74, has reached the age where an owner often wants to step back and sell the ownership piece, especially if the next generation is not involved in the business, said people familiar with the firm and the family.

A potential buyer for Boenning’s brokerage business is LPL Financial Holdings Inc., a national firm that has acquired numerous local brokerages, according to multiple industry sources.

Joseph Muscatello, head of Boenning’s public finance team, which sells bonds for governments, this year moved to Stifel, industry records show. Stifel, a national firm, based in St. Louis, has been beefing up its East Coast presence. Muscatello did not respond to a call or email for comment. The firm’s capital markets team, meanwhile, continues talking to several suitors.

Investment banking “increasingly places emphasis on scale and expertise. That’s pressured smaller firms to consolidate,” said Andrew Greenberg, founder of GF Data in Conshohocken, which tracks mergers and acquisitions activity in the space.

“It’s tough times for these small firms,” said Matt Taylor, commenting on Boenning’s prospects.

Mimi Drake, Adam Landau and Taylor recently merged their firm Permit Capital with Cerity Partners, which manages about $50 billion in assets.

Permit, of West Conshohocken, manages money for wealthy families and individuals, and did the merger last month amid rising compliance and cybersecurity costs. The deal expands Cerity’s reach to 15 U.S. markets. Terms weren’t disclosed.

“You got to get bigger, or you go home,” said Howard Trauger, president of the Bond Club of Philadelphia, and founder of the former Schuylkill Capital Management investment firm, which he sold to Carnegie Investment Counsel of Cleveland in 2015.

Trauger sold amid the challenges of raising enough capital from investors to fund a larger staff just as more Americans were turning to online brokers and index funds such as those sold by Vanguard Group of Malvern and Charles Schwab.

He said the lack of heirs may also be a factor in Boenning’s deliberations. “This is about the aging of the upper-level people,” with few younger people ready to inherit the shops, Trauger added. He also said increasing regulation had the effect of making securities research unprofitable as a sales tool.

“It all boils down to who’s going to pay for research,“ said Trauger. “With the Internet, you don’t need those road trips where you met with potential clients in each city and discussed your best ideas and tried to get them to invest with you. I get research every day from JPMorgan and CFRA. I can hit a button on TD Ameritrade’s institutional service and get all the research I need.”

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