With Stifel Financial Corp.'s bid to buy Morgan Keegan coming up short last week, the St. Louis-based investment banking and financial advisory firm will find slimmer pickings, thanks to years of consolidation in the industry.

"There are so few of these acquisition opportunities remaining," said Chip Roame, managing partner of Tiburon Strategic Advisors in Tiburon, Calif. "Meaningful acquisition candidates are limited."

Despite the challenges, analysts see Stifel maintaining its track record of rapid but disciplined growth. They expect Ron Kruszewski, Stifel Financial's co-chairman, chief executive and president, to make big acquisitions that make sense.

And the parent company of investment bank Stifel Nicolaus & Co. shows no signs of wanting to stop. The company still sees plenty of acquisition opportunities, but possible deals need to be evaluated carefully, Kruszewski said in an interview.

"People sometimes view acquisitions as wins because they simply increase the size of your enterprise," he said. "I don't' view it that way at all. I look at whether it's accretive to clients, employees and shareholders' interests."

Stifel was in talks last year with Birmingham, Ala.-based Regions Financial to buy brokerage Morgan Keegan, which is headquartered in Memphis. After a more than six month long auction process, Regions instead announced a sale to Florida-based competitor Raymond James on Wednesday for $930 million.

Buying Morgan Keegan would have been the largest purchase in Stifel's 122-year history - Bloomberg News reported Stifel's final bid was $875 million - and would have strengthened Stifel's presence in Southeastern states. Morgan Keegan would have added more than 1,000 financial advisers to Stifel's current roster of 2,000 advisers nationwide.

However, analysts who have watched Kruszewski build Stifel into a powerhouse since he joined the firm in 1997 say that avoiding a bidding war for Morgan Keegan was in the best interests of Stifel's shareholders.

"This is not bad news for Stifel," said Michael Flanagan, an independent securities industry analyst in the Philadelphia area. "Kruszewski . . . knows when to fold his cards and stop bidding."

Other analysts agreed Stifel made the right decision to not up its offer, which they said likely would have included higher retention bonuses for Morgan Keegan financial advisers than Raymond James is offering. Since Morgan Keegan was put on the sale block, the prolonged process prompted several financial advisors to leave the firm, taking clientele with them.

"Sometimes it makes sense to step away from a deal if it might not generate the revenue you're hoping for," said Dick Bove, a bank analyst with Rochdale Securities in Tampa.

Growth track record

Stifel is among the fastest growing public companies in St. Louis, growing to $1.4 billion in net revenue in 2010.

In the past six years alone, Stifel quadrupled its number of financial advisers in its retail broker network from 467 in September 2005 and tripled its offices from 97 to 300. It's also boosted equity research, equity capital markets and fixed income staff and capabilities.

Stifel's growth has been propelled by a flurry of acquisitions in recent years, including its 2005 acquisition of the Legg Mason Capital Markets business, the 2007 acquisition of Ryan Beck & Co. and its purchase of Thomas Weisel Partners Group in 2010.

Flanagan said independent brokerage firms that could be a good fit with Stifel in the future include Birmingham, Ala.-based Sterne Agee, which touts itself as one of the largest privately owned financial holding companies in the country.

In an interview, Kruszewski declined to comment on Morgan Keegan or any specific companies the firm has or will evaluate for acquisition.

Speaking generally about the company's outlook, Kruszewski said Stifel remains in growth mode.

"Some of the best deals I've ever done are the ones I didn't do," he said. "Our philosophy is to not grow for growth's sake."

Stifel acquired its headquarters building at 501 N. Broadway, an area of downtown St. Louis where the firm has been anchored for more than a century. Stifel employs about eight hundred people at the 12-story building and in August announced it plans to add 225 jobs over the next three years. Some of those jobs will come through organic growth, but the company likely will expand jobs to accommodate future acquisitions.

"The future is very bright for Stifel, and we intend to fill this building," Kruszewski said.