Davidson Companies acquisition largest yet for Great Falls firm

The Davidson Companies have bought a 90-employee group of investment companies based in Omaha, Neb., the biggest acquisition in the nearly 70-year history of the Great Falls investment operation.

By JAMES E. LARCOMBE Tribune Business Editor

http://www.greatfallstribune.com/apps/pbcs.dll/article?AID=/20041105/NEWS01/411050304/1002

The purchase agreement involves the three Kirkpatrick Pettis companies, which are subsidiaries of the Mutual of Omaha, best known for its insurance offerings.

Davidson Companies and the Mutual of Omaha both are privately held, and no transaction price was disclosed. The deal is expected to be complete by the end of 2004. The Davidson Companies had annual revenue of about $135 million in fiscal 2004, while Kirkpatrick Pettis revenue totaled about $30 million.

The Kirkpatrick Pettis employees will remain in their current locations, which include Omaha, Denver, Chicago, Pittsburgh and Kansas City, Mo.

The big economic news for Great Falls is in the growth of the Davidson Companies, said Bill Johnstone, the chief executive officer.

"We are very excited about it, because it continues to strengthen the company," Johnstone said. "Long-term, that’s good for Great Falls because we intend to keep the company headquartered in Great Falls."

As the company grows, it will continue to add management and support positions, Johnstone said. The Davidson Companies employ about 240 people in Great Falls, while total employment will hit about 825 after the acquisition.

The Davidson Companies typically have grown by adding retail investment offices across the Pacific Northwest and the Rocky Mountain West.

While the Great Falls company bought a Portland-area stock research and investment banking operation in 1998, "this will be, without question, our largest acquisition, in absolute and relative terms," Johnstone said.

The deal involves three Kirkpatrick Pettis companies, two of which focus on providing bond and other fixed-income products and advisory services to institutional and nonprofit customers. Those operations will become part of D.A. Davidson’s fixed-income capital markets group.

A third company, which provides investment management services to individuals and businesses, will be combined with Davidson Investment Advisors.

Kirkpatrick Pettis several years ago sold a retail brokerage operation. While not a household name, especially in the Northwest, Kirkpatrick Pettis is no stranger to its buyer.

"We’ve done business with these guys for years," said Kreg Jones, a D.A. Davidson senior vice president. Jones and Sam Doyle, a Kirkpatrick Pettis executive, will jointly oversee the combined fixed-income operation with 130 employees.

"This is a great acquisition that will benefit both clients and shareholders," said Ian Davidson, chairman of the Davidson Companies, noting that he has been personally acquainted with L.C. "Jack" Petersen, a top Kirkpatrick Pettis executive, for a number of years.

A Mutual of Omaha official said the sale is part of the company’s strategy of focusing on its core insurance business.

"D.A. Davidson is an excellent firm whose history, mission and values align with those of Kirkpatrick Pettis and Mutual of Omaha, making this an excellent fit for both companies," said Dan Neary, president of the insurer.

Jones said the deal will give Davidson Companies a strong presence in new markets, including several major urban areas. Current fixed-income operations are in Great Falls, Bozeman, Spokane, Seattle and Portland.

The combined operations should result in a wider variety of products for individual and institutional investors and more opportunities for the investment company’s public finance operations.

"We have new markets to play in, a larger sandbox, so to speak," Jones said. "We are excited about the deal."

Larcombe can be reached by e-mail at [email protected], or by phone at (406) 791-1463 or (800) 438-6600.