Merrill Answers Petrie's Plea

Updated from 9:21 a.m.

The IPO flare shot off last month by the investment-banking boutique Petrie Parkman did the trick.

Just weeks after Petrie Parkman filed for an initial public offering, Merrill Lynch(MER Quote) announced Monday that it is buying the Denver-based investment firm for an undisclosed sum. The boutique, which specializes in providing merger advisory services to the energy and utility sector, had planned to raise $115 million in the stock offering.

The acquisition will enable Merrill Lynch to bolster its energy investment banking business. A year ago, the big Wall Street firm got back into the energy trading business, after exiting energy trading in aftermath of the collapse of Enron.

"In retrospect it was probably a very good tactical move,'' says David Menlow, president of IPOFinancial.com. "It was basically forcing Merrill's hand."

Menlow notes it's not uncommon for companies to use the IPO registration process as a way either attract potential suitors, or pressure a would-be buyer into making a move.

Petrie Parkman, founded in 1989, earned $4.3 million on $74.3 million in revenue in 2005. The tiny firm, with about 50 employees, had experienced rapid growth in recent years by advising on a number of corporate deals and co-managing IPOs for energy companies.

But Petrie Parkman decided to come public at an inauspicious time, given the lukewarm reception for a number of boutique investment-firm IPOs and the big slide in oil and gas prices.

The past few months have not been kind to many boutique investment firms. Shares of Cowen(COWN Quote), the former investment banking arm of France's Societe Generale, have struggled since the firm was spun off in a $179.5 million IPO in July. During that same month, BankAtlantic(BBX Quote) pulled plans to spin off its Ryan Beck brokerage arm in an IPO.