Big Investment Banks: Watch Your Back

SAN FRANCISCO (07/17/2000) - The founders of some 75 promising Internet startups flew into Santa Barbara, Calif., this month to hear advice from Robertson Stephens on how to prepare for an initial public offering. But Robert Emery, the bank's CEO, doesn't want to dwell on his firm's role in the IPO market.

"Don't say we're a San Francisco-based IPO shop," Emery insists, noting that revenues from its merger and acquisition business now exceed those from IPOs.

Robertson Stephens, a unit of Fleet Bank, no longer wants to be typecast as the boutique bank specializing in Silicon Valley IPOs. Robertson's new pitch: An IPO is merely a phase of a long relationship, merely one financing event that comes after Robertson has helped you with a private placement and before you do a follow-on offering or a major acquisition.

More than ever before, the firm is going up against the big three - Goldman Sachs, Morgan Stanley Dean Witter and Credit Suisse First Boston - to win a piece of the lucrative Internet investment-banking business, and Emery contends that Robertson is gaining ground on all of them.

"The conventional wisdom two years ago was that Robertson was lost," he says, adding that Fleet's agreement to let it focus solely on high technology and other high-growth areas had been its salvation.

Other bankers brush aside such claims. "Delusional" is how Frank Quattrone, the head of CS First Boston's tech group, describes Robertson's conviction that it's an equal to his firm. Quattrone points out that most of Robertson's IPOs this year are trading below their initial prices, while CS First Boston's are not.

Thomas Weisel, a veteran San Francisco banker who now heads merchant bank Thomas Weisel Partners, shares Quattrone's view. When compared with the three major bulge-bracket banks, "they're still minor league," Weisel says.

One thing about Robertson, though, that even its harshest critics confirm: Out of the so-called four horsemen - the original boutique investment banks that established the world of Silicon Valley finance in the '60s and '70s and have all since been acquired by major commercial banks - Robertson has been the most successful.

Montgomery Securities, a firm that Weisel led for decades, imploded after it was acquired by NationsBank, now Bank of America Corp. (BAC) ; dozens of its bankers bolted to join Weisel's new bank. Alex. Brown, now a unit of Deutsche Bank AG (DTBKY) after a stint under Bankers Trust, continues to be active in Internet underwriting, but has yet to emerge as a big player. And it's too soon to judge how Hambrecht & Quist, acquired by Chase Corp. (CCF) earlier this year, will adjust to oversight by a large parent.

Bankers at Robertson say they're well positioned to go further. On the one hand, they boast about keeping a focus on high tech, while their larger rivals cover every industry in the economy. On the other hand, they can now match their competitors' access to deep pools of capital because of their connection with Fleet, the largest commercial bank in New England.

As a result, Robertson has been able to expand its brokerage businesses, as well as open offices in London, Munich and Tel Aviv. Its revenues have increased 500 percent during the last three years, Emery says. And research firm Thomson Financial ranks Robertson fourth in lead-underwriting Internet IPOs and fifth in advising Internet mergers and acquisitions. In both categories, the firm lags behind CS First Boston, Goldman and Morgan.

And despite Emery's assurance that IPOs are not the firm's sole concern, Robertson's gains in becoming a lead manager point to its broader improvement.

Venture capitalists, for instance, speak approvingly of the progress the firm has made, even if it has yet to break into the elite three.

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