Merger By Design


on the BE BANKS list with $529.6 million in assets) also caught the acquisition bug in March when it bought Washington, D.C.-based Independence Federal Savings Bank for $32.6 million. The two banks will have combined assets of approximately $750 million.

A BULLISH MARKET HELPS INVESTMENT FIRMS
A stronger stock market has helped black-owned asset management firms and investment banks broaden their business. Holland Capital Management (No. 10 on the BE ASSET MANAGERS list with $1.9 billion in assets under management) grew its assets under management by $560 million last year. CEO and Chief Investment Officer Louis A. Holland says his firm will continue to focus on growing existing business, and he hopes to increase the assets his firm holds in the mid- and small-cap stock fund it launched for institutional clients. “We have a goal of growing [the company’s] assets under management for existing products by $2 billion over the next 18 months.”

The surge in equities hurt some firms like Pittsburgh-based MDL Capital Management (No. 5 on the BE ASSET MANAGERS list with $3.8 billion in assets under management). Since MDL Capital specializes in more conservative bond funds, President and CEO Mark Lay reported that assets under management dropped 20% last year as more investors opted for riskier, higher-yielding securities as the economy seemed to improve.

Lay expects his firm to rebound with the help of a he
dge fund he launched last year, which he expects will grow to $500 million in assets by the end of the year. His goal is to grow it to $1 billion in assets in 2005. Lay says that the economic picture and the tougher regulatory landscape will eventually force some black-owned asset managers and black-owned mutual fund firms to merge. “It makes for a very tough climate for managers to get new assets and develop new products,” says Lay. “The main way to do it is through consolidation.”

PRIVATE EQUITY SEES OPPORTUNITY
A recent study by the Kauffman Foundation titled Minorities and Venture Capital found that investments in minority business enterprises resulted in returns equal to, if not slightly higher than, traditional investments by mainstream venture capitalists. That fact, in addition to the improving environment for business activity, has helped several black-owned private equity firms capitalize on the growing demand for investment capital.

Hartford, Connecticut-based Smith Whiley & Co. (No. 3 on the BE PRIVATE EQUITY list with $243 million in capital under management) had a good fundraising campaign in 2003, pulling in $115 million from institutional investors for its newly launched Pelman II fund. This year the firm is focusing on raising an additional $285 million to close the fund at its target size of $400 million. President and CEO Gwendolyn Smith Iloani says the environment for minority venture capital firms is so good, she expects to launch an additional private equity fund in 2005. She expects deal-flow opportunities to grow because there are so few black-owned firms and because Smith Whiley is user-friendly for black entrepreneurs who have proven their ability to produce higher returns. But


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