Penn Mutual sells Philly brokerage Janney, one of nation’s largest, to private equity giant KKR

Janney Montgomery Scott, Philadelphia’s largest and oldest securities brokerage, has been sold by Horsham-based Penn Mutual Life Insurance Co. to the private equity investment firm KKR, according to Janney officials.

Janney officials said their company, founded in 1832 and owned since 1982 by Penn Mutual Life, was exchanging one corporate owner for another. Janney “will continue to operate independently” as “a stand-alone private company,” the company said in a statement. The deal is expected to close by the end of the year, pending regulators’ approval.

Janney employs around 2,500 — including about 900 in the Philadelphia area — at offices in 22 states, serving 150,000 clients.

Staff includes more than 900 registered investment advisers and more than 250 investment banking staff, advising clients with assets topping $146 billion. That’s a fraction of the money overseen by giant wealth managers like Malvern-based Vanguard Group but enough to put Janney in the same league as a handful of regionally based brokerages that continue to challenge the big Wall Street firms for investors in search of advice.

KKR and Penn Mutual announced the deal Tuesday but did not immediately disclose the price.

“This is a great outcome for both Janney and Penn Mutual,” Penn Mutual chairman and CEO Dave O’Malley said in a statement.

The 42-year relationship was at times a stressful marriage, with the conservative insurer coping with the cyclical swings of the investment business. In recent years Janney has grown steadily, picking up investment bankers and analysts from Philadelphia-area rival Boenning & Scattergood in 2022 and purchasing other firms outright, including small-city investment advisers’ offices, in the years since.

KKR sees “tremendous opportunities ahead for our business” and will “invest further in our growth” to improve client services, Janney president Tony Miller said in a statement.

KKR said Janney would create a stock-ownership program for all employees so they have a stake in Janney’s future performance, similar to programs KKR has set up in other companies it buys.

KKR (which stands for the founding partners, Henry Kravis, Jerome Kohlberg and George R. Roberts) was one of the earliest and has become one of the largest private equity or buyout companies in the U.S. Its dramatic pursuit in the late 1980s of RJR Nabisco was depicted in the popular book and movie Barbarians at the Gate.

“You know how private equity companies work: They cut costs, raise margins, and then sell the thing within five to seven years,” said Robert Costello, a past Janney customer who manages more than $200 million at his firm, Costello Asset Management in Bucks County.

KKR will need to do more than offer equity to make the deal profitable, Costello said. “The brokerage, which is where their money is, hasn’t done badly, but it hasn’t grown rapidly, except by all their acquisitions, for years.”

“If KKR wants to put money into the business, they could grow it,” he said. “But don’t investors like them usually go the other direction? The big wealth managers like Vanguard and Schwab are taking brokerages’ customers.”

KKR, which is publicly traded, has more than $500 billion invested in more than 100 companies or standing by to purchase others.