NationsBanc Montgomery Looks to Hiring Spree to Move Past Weisel Era

After losing a string of top-level investment professionals and investment-banking clients, NationsBanc Montgomery Securities now is moving aggressively to secure a place among Wall Street's top tier.

To that end, NationsBanc is in hiring mode, according to Carter McClelland, director of investment banking. The firm has given a mandate to three executive-search firms to hire five new unit heads -- three are already on board -- and then help those chieftains put together banking teams at the firm's San Francisco headquarters and in New York.

"I'm definitely a headhunter's dream," muses McClelland, who himself joined NationsBanc in September.

The new emphasis on hiring and building must come as a salve to NationsBanc employees who have watched the firm get picked apart since founder Thomas Weisel left last year. Weisel, who in 1997 sold Montgomery Securities to NationsBank, now BankAmerica (BAC Quote - Cramer on BAC - Stock Picks), formed a boutique investment bank earlier this year, Thomas Weisel Partners. He then began poaching bankers, traders and analysts from his old firm.

And Weisel didn't stop at luring away employees. Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks), which Montgomery Securities took public in 1996, last month picked Weisel Partners as its adviser in its multibillion-dollar takeover of GeoCities (GCTY Quote - Cramer on GCTY - Stock Picks).

While McClelland is taking steps to deal with the loss of talent, he is stoic about the loss of investment-banking mandates to Weisel. "The thing with Yahoo! is a very good example of a great banking relationship," he says.

However, Weisel's not the only one plundering previous NationsBanc clients. Ticketmaster Online-CitySearch (TMCS Quote - Cramer on TMCS - Stock Picks) used NationsBanc to lead its IPO in December, but chose Goldman Sachs to advise in its recent merger talks with parent USA Networks (USAI Quote - Cramer on USAI - Stock Picks) and Lycos (LCOS Quote - Cramer on LCOS - Stock Picks).

Ticketmaster's board went with Goldman because the firm's "expertise made it the most appropriate candidate," says Brad Ramberg, Ticketmaster's chief financial officer. "Besides, there have been a lot of changes in the technology department of NationsBanc."

McClelland estimates that in the past two months, NationsBanc Monty has lost about 20% of the 350 people that made up its investment-banking unit, with the technology, consumer and retail, and business services areas being the hardest hit. McClelland now says the firm will probably restaff to that level again or perhaps a little higher, meaning the hiring of around 100 professionals.

However, one headhunter, who requested anonymity, says that number could easy triple. "Thom really took a lot of key people out of there," says the headhunter.

Seeking to fill the vacuum left by the defections to Weisel's firm and elsewhere, NationsBanc has already hired three new unit heads in the past two weeks. Edward Carter joined from McClelland's old firm, Deutsche Bank, to run consumer and retail sector banking; Brian Brille came from Morgan Stanley Dean Witter (MWD Quote - Cramer on MWD - Stock Picks) to run health-care banking; and Barry Newman joined from Salomon Smith Barney, a Citigroup (C Quote - Cramer on C - Stock Picks) unit, to head up the tech banking unit.

NationsBanc still is looking to fill two more unit chief posts: one in mergers and acquisitions, and one in financial services -- the so-called leveraged buyout desk. The bank already is talking to a handful of senior people at Wall Street rivals, McClelland says.

McClelland denies he is paying a huge premium to attract talent; rather, NationsBanc is paying what comparable talent would get at a bulge-bracket firm, which NationsBanc isn't. "We're letting these people get to that level faster than they would at a bulge-bracket firm," he adds.

What NationsBanc wants to do, McClelland explains, is to try to take the investment arm's industry groups and organize them with parent BankAmerica's existing clients, offering them capital-raising alternatives and acquisition advice. "I think we can leverage a huge imbedded customer base," says McClelland.

However, what sounds good in theory can sometimes fall apart in practice. Often, clients balk at this one-stop shopping approach and instead seek to broaden the sort of corporate investment advice they seek -- and that can mean one firm for banking and another for capital markets and yet another for M&A advisory roles.

A more immediate problem at NationsBanc is that Weisel's departure and employee cherry-picking has gotten wide play by the press. This perception of disarray has hurt NationsBanc and, fairly or not, may have cut the number of investment-banking mandates it subsequently received from corporate clients.

For example, the firm has led only one new issue this year so far despite the rabid investor appetite for tech and Internet IPOs -- NationsBanc's bailiwick -- and that was for a decidedly low-tech company, Packaged Ice (ICED Quote - Cramer on ICED - Stock Picks).

NationsBanc led the initial offering of Packaged Ice on Jan. 29, underwriting the sale of 10.75 million shares at 8 1/2. The stock hasn't moved much from the initial price -- just 12.5 cents in either direction -- and was trading at 8 1/2 Thursday. (TheStreet.com previously examined the dubious possibilities of the Packaged Ice IPO.)

As NationsBanc struggles to reverse its damaged reputation, in a broader sense it also is trying to put the era of Thomas Weisel behind it.

"Obviously, over the short term there was a lot of interruption," says Richard Smith, NationsBanc's head of equity syndication. "But over longer periods of time, everything will be the same -- just with different people."