Wells Fargo to Buy Southland Investment Bank

Wells Fargo & Co. said Monday it would acquire Barrington Associates, a Brentwood-based investment bank that arranges sales of small and medium-sized businesses -- the same type of companies that Wells focuses on.

The companies did not disclose the terms of the deal, the latest in a series of buyouts of niche investment banks that handle mergers and acquisitions in the so-called middle market -- companies with annual revenue of $25 million to $1 billion.

Last year, Japan’s Orix Corp. acquired a majority stake in Southern California’s other prominent mergers-and-acquisitions firm, Houlihan Lokey Howard & Zukin of Los Angeles.

Executives at Wells and Barrington, which has three offices and 40 bankers, said the alliance would have compelling advantages. San Francisco-based Wells, the No. 5 U.S. bank, will more than double the size of its modest investment banking business, adding a desirable line of expertise to the suite of financial products it offers businesses. Barrington will have the opportunity to expand nationally by serving Wells’ customers.

Barrington, with offices in Brentwood, Newport Beach and San Francisco, brokered the 1995 sale of the Kings NHL hockey team to Philip Anschutz and Edward Roski Jr. More recently, it handled the 2002 sale of Herbalife International for $685 million.

Barrington will remain headquartered in Los Angeles and will keep its name.

“With our combined relationship, we offer far more than either one does on its own,” said Barrington Managing Director Jim Freedman, who founded the company in 1982.

Takeovers have been a key tool for Wells Fargo’s Chairman Richard Kovacevich. Wells picked up a small investment banking business in October 2000, when it bought First Security Corp., a bank holding company in Utah.

That business, now Wells Fargo Securities, with offices in San Francisco, Los Angeles, Chicago and New York, will continue in its main lines of work, which include underwriting securities and arranging private placement of debt and equity, said Tim Sloan, a Wells executive vice president who heads its Specialized Financial Services Group.

Barrington Associates will take over all mergers-and-acquisitions work for Wells, perhaps adding offices as it grows, Freedman and Sloan said. No Barrington employees will lose their jobs, they added.

“We don’t think there’s another company in the middle market, particularly on the West Coast, that’s got the name recognition that Barrington has,” Sloan said.

The alliance makes “a ton of sense if you look at where the client base of Wells Fargo is and what Barrington does,” said Byron Roth, chairman of Roth Capital in Newport Beach, an investment bank that raised money for small public companies but does little mergers-and-acquisitions work. The potential problem area, he said, will be whether Barrington’s entrepreneurial style will continue to flourish as a small part of a huge bank.

Freedman was optimistic, citing the success Wells has had with its acquisition of commercial lender Foothill Capital a decade ago. Indeed, Freedman said his former boss at Foothill Capital, John Nickoll, helped initiate the deal announced Monday by raving about how well the Foothill sale had gone.