DMH Bank of America

Macquarie Group Ltd., Australia's largest bank, made good on a pledge to dramatically expand in the U.S. with an agreement to buy boutique investment firm Fox-Pitt Kelton Cochran Caronia Waller LLC.

The $130-million deal to acquire Fox-Pitt marks one of the biggest move the Sydney-based bank has made in the region. And, top Macquarie executives said they'll use the acquisition as a springboard to expand operations throughout North America.

Macquarie set out earlier this year to take advantage of the economic downturn to make acquisitions more cheaply. They've recently snapped up energy advisory firm Tristone Capital Global Inc., trading firm Constellation Energy, and funds manager Delaware Management.

"We'll look at further acquisitions," said Tim Bishop, president of Macquarie Capital in the U.S. "The current market gives us an opportunity to build our business across the Americas, and we will continue to do that."

Macquarie was able to buy Fox-Pitt at a significant discount as the financial crisis hammered valuations of financial services firms. A group of private equity players led by J.C. Flowers & Co. paid nearly $300 million to acquire Fox-Pitt from insurer Swiss Re in 1996.

Though Fox-Pitt is based in London, more than half of its 267 employees are in the U.S. The closely held company, which focuses on M&A advisory services, debt and equity placement and equity research, has major offices in Chicago and New York.

One attraction for Macquarie is that Fox-Pitt specializes in financial-institutions deals, an area that has been a hotbed of activity over the last year. The firm ranked 26th among advisers in 2008, when it advised Bank of America Corp. (BAC) on its troubled acquisition of Merrill Lynch & Co.

The deal continues a global repositioning strategy laid out by Chief Executive Nicholas Moore to expand Macquarie's investment banking operations. He is pushing to build a global stock brokerage business focused on Asia, London and New York.

Macquarie has been struggling this year along with other investment banks sideswiped by the recession and financial crisis. The bank said in February that full-year profit will plunge 50%, snapping 16 years of growth due to mounting investment and trading losses.

In addition to making acquisitions, Macquarie has been on a hiring binge to help refocus the bank's operations. Most notable was last week's hire of veteran Asian banker Kalpana Desai, the former head of mergers and acquisitions at Bank of America Merrill Lynch.

Macquarie has also hired several U.S. bankers from firms such as Citigroup Inc. (C) and Morgan Stanley (MS), as well as attracting talent that fled Lehman Brothers after the investment bank's collapse.

Fox-Pitt's George Cochran and Len Caronia will stay on board once the acquisition is completed as chairmen of Macquarie Capital's global financial institutions advisory business. John Waller, who is currently Fox-Pitt's president, will co-head the financial institutions group.

-By Joe Bel Bruno, Dow Jones Newswires; 212-416-2469; joe.belbruno@dowjones.com

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