Signal Hill planning to expand

Local investment bank has already doubled in size thanks to roots in Alex. Brown

October 03, 2006|By Laura Smitherman | Laura Smitherman,Sun reporter

Several former executives from Alex. Brown & Sons, a firm that figured prominently in Baltimore's history but whose ranks were decimated after being acquired several years ago, announced a comeback of sorts yesterday.

Signal Hill Capital Group, a boutique Baltimore investment bank founded by former Alex. Brown workers, will expand its business while adding market research, trading and sales.

Chief Executive Officer Scott A. Wieler, who left Alex. Brown a few years after it was acquired by Deutsche Bank AG in 1999, and his partners say they are hoping to revive some of the success and spirit of the old Alex. Brown investment banking business.

FOR THE RECORD - A photo caption in yesterday's Business section misspelled the name of David M. DiPietro, one of the founders of Signal Hill Capital Group.
The Sun regrets the error.

"The guiding principles that made Brown successful we embrace here," Wieler said.

Signal Hill recently doubled in size to 30 employees and now occupies one of the top floors of 300 E. Lombard St., with a view of the Inner Harbor. The five-year plan calls for the firm to grow to about 150 employees and do at least $100 million in business annually, targeting small and mid-cap companies.

Wieler founded Signal Hill in 2002 with Thomas W. Johnson. David M. DiPietro and Herbert A. May III will lead the firm's expansion. All four are Alex. Brown alumni, and 16 of Signal Hill's 20 partners worked at one time for Alex. Brown.

Signal Hill even counts among its outside investors Benjamin H. Griswold IV, a descendant of the Alexander Brown who started his namesake firm in Baltimore at the beginning of the 19th century. The Signal Hill name refers to an area known today as Federal Hill where Brown and other merchant traders raised flags to signal the arrival of ships.

The firm's partners have wide experience including work on the initial public offerings of such household names as AOL and Starbucks Coffee Co.

Signal Hill has research expertise in educational services, media, technology and clean energy, and counts among its clients Educate Inc., which operates Sylvan learning centers, and RWD Technologies.

The firm's strategic plan is to fill a void by focusing on small or emerging companies that have been overlooked by large Wall Street firms seeking larger deals that bring bigger fees.

"Wall Street has tightened its belt, and the major bulge-bracket firms have cut back on research in general and specifically have cut back in terms of what they do in the small and mid-cap area," said Jack Laporte, who manages a small-cap fund at T. Rowe Price Group Inc. At the same time, he said small-cap investment bankers such as Alex. Brown have been "gobbled up."

Signal Hill also is taking advantage of a shake-up among local industry players in the past year.

Legg Mason Inc.'s capital markets business, which included investment banking, research and trading operations, was sold to Stifel Financial Corp. of St. Louis.

Wachovia Securities also moved the headquarters for its equity capital markets division - and jobs - from Baltimore to New York.

Poaching

That changing competitive landscape led to poaching by Signal Hill. "Whenever there's a change in a person's firm and their lives, it can create opportunity for us to capture talent," said DiPietro, who had led Alex. Brown's equity capital markets group and was a vice chairman at Deutsche Bank. He left in 2003 and started a horse-breeding business.

The new group at Signal Hill came together with the help of Mayo A. Shattuck III, who helped engineer Alex. Brown's sale to Bankers Trust Corp. in 1997, before it was sold again to Deutsche Bank. Shattuck is now CEO of Constellation Energy Group Inc.

Understanding model

Over the past year, the Signal Hill group frequently gathered and would try to woo local talent at the Boatyard Bar & Grill in Annapolis owned by Dick Franyo, also a former Alex. Brown pro.

"The people there understand the old Alex. Brown model, and I think there's certainly a place for highly focused firms with great talent," Franyo said. "These guys will do well."

laura.smitherman@baltsun.com

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