The company, which is continuing Hough's arts sponsorships, looks to grow into Florida with fixed income and retail brokerage groups.
By HELEN HUNTLEY
Published May 18, 2004
The small artists creating masterpieces probably didn't notice, but a new corporate banner hung over the children's art tent at the Mainsail Art Festival in St. Petersburg this year. Since acquiring William R. Hough & Co. on Feb. 27, RBC Dain Rauscher has been busy assuming the company's roles, from investment banker to finger painting sponsor.
For RBC Dain, buying Hough wasn't just about getting bigger; it was about finding a way to tap into a long-coveted market. With a presence in nearly every other state, company managers were acutely aware of a conspicuous hole in the corporate footprint.
"Florida was the only large state missing; it was so obvious where we needed to go," said Chris Hamel, director of public finance for RBC Dain, which is headquartered in Minneapolis and owned by Royal Bank of Canada.
"We've had some modest public finance efforts in the state in the past and one of the things we learned was how very important it is to have people in the state who understand the culture and the way things are done in a given location," he said. "This gives us the critical mass in Florida to effectively compete."
Dain is pushing into Florida on two fronts, through a fixed-income group and a retail brokerage group. The former is Hough's long-time strength, and includes underwriting municipal bonds, trading bonds and selling bonds to institutional clients. Over its 40-year history, Hough raised $69-billion underwriting 2,400 new bond issues.
Hough's retail brokerage business was a much smaller enterprise focused on selling fixed-income investments.
The company had offices in five markets - St. Petersburg, Orlando, Palm Beach, Miami and Naples - some of them previously located in branches of Republic Bank, which Hough founder William R. Hough controlled until its recent sale to BB&T.
"This acquisition gives us a great place to start to grow," said Darryl Traweek, southeast regional director of RBC Dain's retail brokerage organization.
As the nation's eighth-largest full-service brokerage, RBC Dain can offer a broader range of investment products and a deeper inventory of fixed-income products. The company has 1,800 financial consultants and 6,000 employees.
"Our strength at Hough was fixed income and we were just starting to develop full-service brokerage," said Evan Whittle, who heads the retail brokerage operation in St. Petersburg.
"We can now meet the total needs of any client. Instead of having one trading desk in St. Petersburg, we now have 12 around the country so our inventory is much greater."
Royal Bank of Canada also sees cross-marketing potential for the brokerage and its U.S. banking unit, RBC Centura, which is expanding in Florida, having recently bought Provident Financial Group's Florida network.
"Florida is a growing, dynamic market for the segment of the population we look for, the retired folks," Traweek said. "Florida is also a very good landing spot for a lot of retired Canadians during the off months."
In addition, the tie to RBC Centura will allow the fixed-income group to offer loans and other banking products to municipal clients.
Most Hough clients have stayed with the company under its new name, Traweek said. "We've been extremely pleased with the retention."
However, the company hasn't kept all Hough's employees, trimming the Florida staff to about 140, most of them part of the fixed-income group.
Seventy-nine Hough employees lost or soon will lose their jobs as a result of the acquisition, according to a notice RBC Dain filed with the state. Many worked in operations, but high-level positions took some cuts too, including a lawyer and two portfolio managers.
Some employees also left on their own. Most noticeably, a dozen Hough employees moved to a rival firm, Stephens Inc., which has a bond trading and institutional sales office just a few blocks away from Hough's old headquarters in downtown St. Petersburg. Stephens, which is headquartered in Little Rock, Ark., said it has no plans to open a retail operation.
"We wanted to keep them, but they just didn't want to be part of such a big firm," said Robb Hough, who was president of the company his father founded.
Now most former Hough employees report to someone else while he oversees underwriting of bonds secured by pools of federally guaranteed student loans, a niche market in which Hough was particularly strong.
So far RBC Dain has continued Hough's tradition as a high-profile sponsor of the arts.
"I expect that they're going to continue to do some of the things we did and be a player in the community," Robb Hough said.
Terms of the sale have not been disclosed. The Hough family owned 60 percent of the stock, with the rest held by nonfamily employees.
The transition has been fairly smooth, both sides report. RBC Dain's culture and business style grow out of its history as a collection of regional companies, including Dain Bosworth, Rauscher Pierce Refsnes and Tucker Anthony Sutro.
"Hough had a business model and approach to the market similar to what we have in 10 or so other states," public finance director Hamel said.
"All the reasons we were interested in buying and they got comfortable in selling had to do with the fact that we value who they are and want that to stay in place."
That's not to say some adjustments haven't been required. "I still get a little bit of a surprise," Robb Hough said, "when I call in and my secretary answers the phone "RBC Dain Rauscher."'
