Consolidation of Firms to Continue, SIA Says
Jan. 2, 2001 The consolidation frenzy among Wall Street firms will likely continue for the next few years, according to a report released by the SIA.
In the last year, such U.S. securities giants as PaineWebber, Donaldson Lufkin & Jenrette and Dain Rauscher have either merged with, or been acquired by, a foreign bank. More than 400 mergers or acquisitions of U.S. securities firms have taken place since 1997.
The November report states that "when the eventual downturn comes, smaller firms may be among the first to close or be acquired by the larger firms," resulting in fewer firms in the industry.
Key reasons sited for the mass consolidation and mergers are: the need for increasing amounts of capital, secondary market trends, a changing regulatory environment and advances in technology.
But some smaller firms see it differently. West Coast regional Wedbush Morgan in Los Angeles has no plans on closing or being acquired, according to Ed Wedbush, president.
"We see a tremendous opportunity to expand," he says. "We’ve had the entrepreneurial spirit here since I started this firm in 1955. And I can tell you that Wedbush Morgan is not going to be merged into, or purchased by, a larger firm."Stanley Brooks, chairman and president of Brookstreet Securities, an independent firm in Irvine, Calif., says the merger-acquisition frenzy is not a threat to the small fry, and it’s nothing new."Some firms, particularly European firms and banks, are looking for a greater distribution of product," Brooks says. "This type buying and acquiring always seems to be going on to some degree."
The SIA report states that many smaller firms that serve niche markets could continue to survive in the coming decade. But Wedbush doesn’t buy into that limitation. "We believe in providing a broad spectrum of services for our clients," he says. "You can live in fear that you can’t compete, or you can be very aggressive and stay ahead with technology and services."Wedbush says he is planning to hire more people next year to add to the firm’s current staff of 600. -- Tom Nelson
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