Tag: TWPG

Aftershocks on the tech M&A banking landscape

Brenon Daly

Contact: Brenon Daly

In our report on the 2009 league table, we noted that Wall Street had been rocked by an earthquake in 2008 but that the smaller aftershocks were continuing to ripple across the tech banking landscape. Another one of those was felt Monday, when Thomas Weisel Partners agreed to sell itself to a rather old-line institution, Stifel Financial, for around $300m in stock. The deal, which is slated to close this quarter, would add TWP’s investment banking business, with its focus on tech, healthcare and alternative energy, to Stifel, which is known more for its transactions involving financial institutions and real estate.

In 2008, we counted 11 acquisitions of firms involved with tech M&A, including powerhouses such as Bear Stearns, Lehman Brothers and Merrill Lynch. The number of deals in 2009 dropped, as did the size of them. There were just five purchases of investment banks with tech practices last year, including the pickup of Cowen and Co by hedge fund Ramius Capital and Raymond James & Associates’ acquisition of Lane, Berry & Co.

As we look at the league table, we’re struck by the fact that Stifel is adding a pretty busy tech advisory shop by buying TWP. (If you would like a copy of our 2009 league table report, just email me.) Last year, TWP finished tied for 12th place (with Citigroup) in terms of the number of IT transactions that it worked on. On a pro forma basis, adding Stifel’s four deals to the 10 that TWP banked would put the combined entity at 14 IT transactions, tied for fifth place.

If anything, TWP has picked up its pace this year. It has already worked on five deals worth more than $1.2bn, including sole sell-side credit on the pending $755m sale of Phase Forward to Oracle. Additionally, it’s been arguably the most-active midmarket underwriter of tech IPOs. TWP is sole bookrunner for offerings from SciQuest as well as SPS Commerce, which was one of the few IPOs last week that actually finished above water. It is also co-lead on Tangoe, which filed earlier this month, and Convio, which is slated to price this week.

A new jersey for Thomas Weisel

Brenon Daly

Contact: Brenon Daly

As a former national cycling champion, Thomas Weisel undoubtedly knows there are races where you can break away from the pack and stick a winning move all the way to the line. And then there are races where no matter how hard you try to turn the pedals, the peloton just swallows you up and drags you home to an undistinguished placing. If Weisel’s first sale of his investment bank is the former, then the sale of his namesake bank announced today is, arguably, the latter.

Back in mid-1997, Weisel sold Montgomery Securities for $1.2bn in cash and stock to NationsBank, which is now known as Bank of America. On Monday, Weisel sold Thomas Weisel Partners for just one-quarter that amount. Stifel Financial will purchase TWP for around $300m in stock. (Shares of Stifel dipped slightly on the announcement, shedding 4%.) The deal is expected to close this quarter.

To be sure, the proposed combination makes a ton of sense. It adds TWP’s investment banking business, with its focus on tech, healthcare and alternative energy, to Stifel, which is known more for its deals involving financial institutions and real estate, among other areas. Furthermore, the combined company would have research coverage on more US public companies than any other Wall Street firm. On paper, TWP brings a focus on the New Economy that Stifel has been missing, even as the St. Louis-based firm gobbled up other parts of the banking business over the past half-decade.

But for TWP and its founder, the sale probably comes up a bit short of what had been imagined when the bank opened its doors in 1999. (Of course, that’s probably true for any venture launched in that era, when all the charts went up and to the right in uninterrupted lines.) More recently, shares of TWP spent much of 2010 trading below book value. Since Wall Street was hardly willing to assign any value to the firm, the sale of TWP at an eye-popping premium of about 70% is probably not a bad exit. Who knows, maybe with the change of jersey, the ultra-competitive Thomas Weisel can get back on the podium.