FRANK Quattrone has been advising technology companies since 1981, first at Morgan Stanley, then Deutsche Bank and finally Credit Suisse First Boston. He and his teams are estimated to have advised on more than 400 mergers and acquisitions and more than 350 financings during his nearly 30 years in the business. He took companies such as Cisco and Amazon to the stock market in the 1990s. In the early days, he says, the technology practices of the big banks were relatively small, almost like boutiques.
In 2003, he left Credit Suisse when he faced obstruction of justice charges that were ultimately dropped. When he decided to return to business, he briefly considered starting a private equity company, but decided his main interest was in advising technology companies on mergers and acquisitions and financings. " I wanted to return to my roots as an adviser,” he explains. The idea for his new firm, Qatalyst, came when he was providing informal market advice to a CEO friend . “The synapses started firing, I came up with ideas that the CEO found creative and high-impact. It got me thinking about how to structure a firm that focused on providing advice.”
This recent Financial Times article describes the return of the boutique adviser:
'FRANK Quattrone is conservatively dressed in a suit and tie, and a little nervous. He does not want to talk about himself, not even about his low golf handicap. It is only when discussing technology mergers that he relaxes and becomes animated.
He muses over what companies Dell and Hewlett- Packard should buy to protect themselves from Cisco’s encroachment into their server businesses, and wonders where this will leave IBM. More than golf, this “three-dimensional chess” is his game of choice.
Quattrone, a former star banker at Credit Suisse, returned to Silicon Valley deal-making last year. He left the bank in 2003 and stayed out of the deal business for five years to fight legal charges that were ultimately dropped. Now, he has re-emerged at the helm of Qatalyst, a boutique technology advisory firm, which he started in March last year.
In spite of his long absence from the market and the lack of a big bank on his business card, Quattrone has popped up recently as an adviser on a handful of prominent deals in the technology sector, thanks in part to a “golden Rolodex”. He counselled Google on Microsoft’s proposed takeover of Yahoo early last year, and he helped Data Domain, the data storage company, negotiate a tricky bidding battle in which both NetApp and EMC vied for ownership of the company.
More broadly, Qatalyst is part of a trend in the sector of boutique technology advisory firms that is trying to draw business away from the more established players in the technology world.
Quattrone sees it as a return to the early days of technology in the 1990s, when a handful of west coast boutiques handled the bulk of technology initial public offerings. These have now all either been closed or subsumed into larger companies.
In the US, the new wave of technology boutiques includes Allen & Company, which has traditionally focused on media, Greenhill & Co, one of several New York boutiques to set up shop in Silicon Valley, and Moelis & Co, run by the former head of the UBS investment banking arm, Ken Moelis.
In the UK, Arma Partners, a company specialising in technology, media and telecoms advisory work, has handled a big share of European technology deals over the past year, closing 11 deals since last year’s market crash. Qatalyst also opened a London office earlier this year and both Thomas Weisel Partners, the San Francisco- based investment banking firm, and Piper Jaffray, the US mid- market investment bank, have recently bolstered their technology teams in the UK.
Technology teams at many big banks have thinned out in recent years, as stock market debuts and the pace of deals have slowed. For the smaller technology boutiques this has presented an opportunity to build on what they claim is their deep specialist knowledge of the industry.
“When I was taking companies public at Credit Suisse, we were taking only the top 10% of companies,” says Quattrone. “The technology world is underserved at the moment. Existing firms can service the top clients, but 50% to 75% of the market is underserved.”
Arndt Zinnhardt, chief financial officer of German technology company Software , who used Arma Partners during its 680m acquisition of IDS Scheer earlier this year, says specialist understanding is a powerful tool: “You are talking with specialists, with a deep understanding of technology, and when we deal with Arma we can select the individuals working on the assignment.”
Boutique technology banks have always had their place. In the UK, Regent Partners, for example, has been handling a steady stream of small deals for technology customers for 21 years. The difference now is that some boutiques are increasingly trying to challenge the bulge bracket banks for work on bigger deals. Paul Guely, a former technology banker at Goldman Sachs who set up Arma Partners in 2003, says he has seen big banks as his competitors right from the start. Even the company’s first mandate — the 210m sale of Suse Linux to Novell — was won against serious blue-chip competition. “We pitched against Deutsche Bank, Lehman Brothers and Citigroup,” he says. “Our firm had just opened for business, we were two partners with no announced deals, and our visiting cards had probably been printed the day before. But as individuals, we each had 15 years’ experience and we got the business.”
Many smaller clients like the individual attention that a boutique can give them. “If you think about the big household names in banking, they are interested in doing siz able transactions,” explains Zinnhardt. “The lower end is not their sweet spot, and you would not normally get their ‘A’ team.”
Boutique bankers claim that the willingness to do small deals gives them an advantage. “If you only do the big deals you become just another bulge- bracket firm. If you don’t do the small deals, you are not in the flow,” Guely says.
The new breed of boutique bankers bristles, however, at any suggestion of being a cut-price option. “A boutique is not a corner shop. It is a high-end designer shop, like Prada,” says Guely. “We don’t see not being a financial supermarket as something to be ashamed of. In the last few years, the financial supermarket model has been completely discredited. Being a boutique is a badge of honour.”
© Financial Times
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Being a Boutique is a Badge of Honour
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