Boutique Banks Find a Niche in Tech
A new breed of boutique investment bank is making its mark on the merger-crazed tech industry. Unlike the niche securities firms that a decade ago focused on research, stock sales, and initial public offerings in addition to mergers and acquisitions, this crop focuses more narrowly on matchmaking but is no less adept at getting in on some of tech's most lucrative deals.
Consider the Yahoo-Microsoft mating dance. In February, Yahoo (YHOO) hired Moelis & Co., the Los Angeles firm started last year by former UBS (UBS) investment banking head Ken Moelis, among other banks, for advice on resisting Microsoft's (MSFT) unfriendly offer, then worth $45 billion. Meanwhile, Google (GOOG) hired Frank Quattrone's new Qatalyst Group for advice on how to respond to Microsoft's bid (BusinessWeek, 3/27/08), according to published reports, supplementing services from Credit Suisse (CS).
Boutiques Offer More Flexibility
More and more, small banks that specialize in mergers and acquisitions and landing investments for privately held clients are joining high-profile houses such as Goldman Sachs (GS), Morgan Stanley (MS), Citigroup (C), and Merrill Lynch (MER) in helping to stitch together deals.
Boutiques that employ at most a few dozen bankers are using a combination of long-standing industry relationships, small teams that assign senior staff to deals, and the flexibility to dart in and out of smaller buyouts to win business. They're gaining prominence as some of the top banks have cut or reassigned tech bankers amid a credit crisis and lull in IPOs.
GCA Savvian Group advised on 45 M&A deals worth $23.6 billion in 2007, pushing it to 59th place based on deal count, from 71st in 2006, according to data compiled by Thomson Reuters (TRI). "Our pitch is all around being a trusted adviser," says Rich Jasen, a Savvian managing director. "This is not something where a managing director shows up for the pitch, and the next time you see him is at the closing dinner."
Filling an Important Niche
Boutiques' influence is being felt around the computer industry. Electronic Data Systems (EDS) hired Evercore Partners (EVR) to help structure its $13.9 billion sale to Hewlett-Packard (HPQ), announced May 13. Evercore has been among the top 25 banks based on M&A transaction value the past four years, after ranking 104th in 2003. Other recent deals include advising IronPort Systems on its $830 million sale to Cisco Systems (CSCO) in January, 2007.
Boutiques' influence is being felt around the computer industry. Electronic Data Systems (EDS) hired Evercore Partners (EVR) to help structure its $13.9 billion sale to Hewlett-Packard (HPQ), announced May 13. Evercore has been among the top 25 banks based on M&A transaction value the past four years, after ranking 104th in 2003. Other recent deals include advising IronPort Systems on its $830 million sale to Cisco Systems (CSCO) in January, 2007.
Investors and entrepreneurs say the boutiques fill an important niche in personalized investment banking that's been absent from Silicon Valley since four powerful boutique banks of the '90s—Alex. Brown, Hambrecht & Quist; Robertson Stephens; and Montgomery Securities—either closed or were subsumed by larger firms in the wake of the dot-com crash. The new crop of boutiques is a welcome presence at a time when the IPO drought has made it tough for venture capitalists to get the attention of senior bankers at the so-called bulge-bracket firms—even for a sale. "We can't get our companies out, and one reason is, we can't get the attention of the investment bankers," says Mark Heesen, president of the National Venture Capital Assn.
Unlike those '90s firms, the new boutiques tend to focus on M&A advice and fund-raising, eschewing IPO underwriting, sales of securities, and extensive research. "We're not trying to be everything to everybody," says Brian Roberts, a senior managing director at Evercore. "We would much rather have a dialogue with the CEO about what keeps him up at night."
Union Square Advisors, founded last September by a group of former Quattrone colleagues, has quietly won several M&A and fund-raising projects, and is in talks with large tech companies about future work, say people familiar with the firm's plans. The Yahoo assignment helped catapult Moelis to 12th most active, based on deal value in the first quarter.
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12th entry
author : Aaron Ricadela
title : Boutique Banks Find a Niche in Tech
date : May 23, 2008,
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