Tech Banker Amasses Loyal Following

Call Frank Quattrone the Secretariat of investment banking. Like the legendary racehorse, Quattrone, the thoroughbred tech banker, completed a Wall Street version of the Triple Crown last week.

Quattrone advised Ascend (ASND) on its $18.5 billion takeover by Lucent (LU), marking the third time he has worked with the networker on a major deal. He also took the company public in 1994 and then advised Ascend on a big acquisition three years later.

But what's most interesting is that he accomplished this feat at three firms -- Morgan Stanley, Deutsche Bank and Credit Suisse First Boston.

"I think about 99% of the clients we had at Deutsche and Morgan are working with us now at Credit Suisse," says Quattrone. He adds that Credit Suisse has been involved with tech-company transactions valued at more than $50 billion since last summer, when he and his group of about 80 joined the firm. Now, the group numbers about 160.

Q-Factor Quattrone's big deals and where he was Ascend's $18 billion purchase by Lucent January 1999 Credit Suisse First Boston Amazon.com IPO May 1997 Deutsche Bank Ascend's $3 billion acquisition of Cascade March 1997 Deutsche Bank Netscape IPO August 1995 Morgan Stanley Ascend IPO May 1994 Morgan Stanley

Quattrone's power also shows that it's possible for investment banks to essentially buy business by luring top talent, a tactic that's perhaps even more important for foreign investment banks like Deutsche and Credit Suisse First Boston, which are trying to work their way into the U.S. market. But foreign investment banks such as NatWest and Barclays so far have largely flopped when they've tried to work their way into Wall Street's top echelon.

Deutsche spent about $25 million to lure Quattrone and his group from Morgan Stanley in 1996 and gave them a percentage of the business they attracted. But the German parent lost patience with its overall U.S. equity efforts and drastically restructured here last year, leading to Quattrone's exit. Deutsche, meanwhile, is taking another shot with its pending purchase of Bankers Trust (BT).

But Credit Suisse First Boston has had more success, even before Quattrone. It was ranked sixth last year in securities underwriting, ahead of such household names as Bear Stearns (BSC) and Donaldson Lufkin & Jenrette (DLJ). Quattrone's group is adding to that.

Last Wednesday, the firm priced a $200 million secondary offering for EarthLink (ELNK), a highflying Internet company. Given the average fee on a secondary, the deal could have garnered the firm between $4 million and $5 million, one equity pro estimates.

Quattrone's group "is doing a great job," says Chuck Ward, Credit Suisse First Boston's head of global corporate and investment banking. "They're everything we thought they'd be."

Quattrone says he wants to build the tech group into a $200 million to $300 million annual revenue stream for the firm, indicating that projection is far above what his group generated at Deutsche. For last year's first half, Credit Suisse First Boston reported $4.5 billion in revenue.

Several other Wall Street equity and banking pros say the phenomenon of carrying big-money clients to a new firm is a rarity, holding true for only a handful of Wall Street rainmakers.

And Quattrone hasn't had unchecked success. Amazon.com (AMZN), which Quattrone took public in May 1997 while at Deutsche, has returned one other time to the capital markets for a junk-bond offering last year. It chose Morgan Stanley Dean Witter (MWD).

Yet that's uncommon for Quattrone. "Much as it would offend investment bankers, their clients are not at portable as they think," says one Wall Street research professional, requesting anonymity. "But in the case of Frank, his clients are portable."

Scott Coburn, PaineWebber's co-head of equity capital markets, agrees, saying it's always in question when a banker moves from one firm to another whether clients will follow.

"If the bank he leaves has a franchise that the clients want to stick with, the clients will stay" with the firm, Coburn explains. The fact that Quattrone took a whole technology department, complete with bankers and analysts, with him added to clients' desire to stay with the banker's group, Coburn explains.

Ken Fehrnstrom, Ascend's vice president of business development, says that's exactly why Ascend stuck with Quattrone. "Frank's team is one with which we feel very comfortable," says Fehrnstrom, adding that Ascend has worked mainly with two of Quattrone's team, bankers George Boutros and David Britts. "They're the premier high-tech M&A guys in the business."

Fehrnstrom says the company evaluates its banking relationships continually and has gone with other banks in other situations. Still, Ascend does find its way back to Quattrone's group for its biggest deals. "We have a very high regard for them," Fehrnstrom says.

Ascend's not alone. EarthLink first filed to hold its secondary offering in early June with Deutsche as its lead bank. The offering was delayed, like many others, when the equity and new-issue market dried up in summer. By the time EarthLink moved to put its offering back on the table, Quattrone had moved.

Grayson Hoberg, EarthLink's CFO, says the company chose Credit Suisse First Boston because of Quattrone's group. "They started the road show and oversold the book," Hoberg says. "The level of service was great."

Another tech company, Micromuse (MUSE), turned to Credit Suisse for its secondary last July, even though Deutsche Bank had underwritten the company's IPO in February.

Mike Taylor, vice president of corporate finance, says the company moved its business to Credit Suisse First Boston because the banker working with it, Bill Brady, and the analyst covering it, Wendell Laidley, both moved with Quattrone. The lure, Taylor says, was that Credit Suisse First Boston has a superior sales staff, analyst coverage and relationships with institutional buyers compared to Deutsche.

Says Taylor, "For us, it was like having the same brains in a better body."

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