Bulging boutiques

Contact: Brenon Daly

In our league tables report, we noted that some 143 firms advised on at least one technology transaction in 2008. That was down slightly from the 153 firms we tallied in 2007, even as the number of tech transactions dipped about 17% year over year. Obviously, some of that decline can be chalked up to the investment banks that dramatically and abruptly disappeared in the last year. But more so, the thinning ranks of investment banks can be attributed to the fact that deal flow is drying up.

So far this year, the number of deals announced has fallen about one-quarter to just 574. (And don’t even ask about M&A spending, which has plummeted to just $7bn from $49bn during the same period last year.) That, combined with the fact that fees are increasingly coming under pressure, has meant much leaner times for the advisory business in general. So far, the impact of that has primarily been felt by the bulge-bracket banks, which have made sharp cuts in their ranks since September.

This has sparked a flow of talent from big shops to small. Earlier this week, for instance, a pair of former Bear Stearns bankers founded their own tech advisory firm, Stone Key Partners. We expect many more of the dislocated bulge-bracket bankers to follow suit and hang out shingles of their own. In the meantime, many bankers have joined boutiques of various sizes. Since Wall Street imploded in mid-September, boutique firms including Revolution Partners, America’s Growth Capital, Perella Weinberg Partners, Evercore Partners and Redwood Capital have all picked up former bulge-bracket bankers.

And there are additional moves we’ve heard about but have yet to be announced. We understand that Goldman Sachs’ software banker, Ian Macleod, is set to join Qatalyst Partners, the San Francisco-based firm launched by Frank Quattrone a year ago. We also heard recently that Richard Vieira, who worked a number of open source transactions at Jefferies & Co before leaving some two years ago, has resurfaced. Vieira is joining Shea & Company, a three-man shop founded in 2005 by JP Morgan Securities’ former head of software banking, Michael Shea.