All is Not Lost for Technology Bankers

September 16, 2002

Apparently tech stocks weren't the only things that went plummeting after the tanking of the technology sector. Lethargy in the IPO market and M&A activity has facilitated the shut down or virtual disappearance of some of the most prominent investment banks that served several high-tech companies during the tech boom. There have been not more than 60 IPO's this year, both tech and non-tech, which is a sharp decline from nearly 500 IPO's in 1999. Robertson Stephens, a boutique investment bank in San Francisco, which at its peak in 1999 led the IPO's of 45 companies, was shut down by parent company FleetBoston last month. The boutique firm was involved in just 6 small offerings this year, of which it led none. The fate of its major competitors (including Montgomery Securities, Hambrecht & Quist and Alex. Brown & Sons), which also engaged in underwriting tech companies, has not been any different as each one of them have been absorbed by larger companies.

The silver lining amidst such carnage is an increase in venture-backed IPO dollar volume, which reached $1.3 billion in the second quarter of 2002, with 12 U.S. companies going public, the largest number since 23 venture-backed companies went public in quarter four of 2000. The most number of venture backed IPO's were in the medical/life sciences sectors, according to Thomson Venture Economics and the National Venture Capital Association (NVCA). While opportunities for Internet and telecom deals have dried up since the tech crash, growing interest in life sciences provides bankers with prospects of creating a niche for themselves in this growing sector.

Join us at Larta from noon to 1:30 p.m. on Tuesday, October 8, 2002 for an Economic Research Briefing on Private Equity. Speaking will be Garrick Ahn, Principal of Caltius Private Equity, which invests equity in small- to mid-sized businesses. Larta staff will also present its latest economic research on the private equity markets.

By Ketaki Sood, Larta Research Economist