Thomas Weisel Partners
, the upstart technology investment boutique, plans to sell 10% of itself to an undisclosed financial partner for $100 million, according to a person close to the situation.
The agreement, which is still being negotiated, also includes a commitment by the new partner to invest up to $1 billion in a series of tech- and growth-focused investment funds controlled by Weisel Partners. The deal, which will be in the form of a privately placed security that converts into a 10% stake within five years, is expected to be announced within two weeks.
A Weisel Partners spokeswoman declined to comment on the situation. (Thomas Weisel Partners was a co-underwriter of the initial public offering of
, the publisher of this Web site.)
A capital infusion by a major financial institution into Weisel Partners would be yet another sign that latecomers to the tech party are now trying to catch up. Two weeks ago,
was rumored to be in talks to buy
Volpe Brown Whelan
, a private technology investment banking
boutique, and in the fall,
agreed to acquire
Hambrecht & Quist
, one of the pioneering tech investment banks.
Big banks and other financial giants are trying to increase their reach into the technology and Internet sectors, says Greyson Williams, head of banking M&A research at
in Charlottesville, Va. "One way they're doing it is with more and more direct investments in such things as venture capital," he says. "It's probably a statement about how the tech sector has become more stable."
And a linkup with a firm like Weisel, which is known for its strong connections and investments in the Net start-up crowd, can be a way for a big bank to get its hooks in without risking an outright acquisition. "These boutique investments can be a very different animal for a bank to have tucked under its umbrella," Williams explains. "But at times like these, a bank that has some of those tech investments in its portfolio can profit from that diversity."
The repeal last month of the
could mean any one of a number of banks or insurance companies can acquire a piece of the firm. And with half the financial world angling to get further involved in technology and Internet investments through venture capital or private-equity operations, Weisel's list of prospects is indeed long.
The price Weisel Partners is said to be getting for the 10% stake gives the entire firm a valuation of $1 billion -- roughly the same price chieftain Thomas Weisel got for
in 1997 when he sold it to
. "It goes to show you the market we're in -- that firm is valued at $1 billion after just a year of operations," cracks one bulge bracket banker.
The new firm was formed in January, not long after Thomas Weisel left the combined
. And it wasn't long before Weisel began hiring bankers, traders and analysts from his old firm. In addition to talent, Weisel also managed to lure away Montgomery clients such as
, which Montgomery took public in 1996.
Although private, Weisel Partners reported in a press release on Oct. 12 that third-quarter revenue had risen to $48 million from $32 million in the second quarter. The firm also said it was expecting to notch record revenue for the year of approximately $150 million, adding the firm has been profitable since April. Weisel Partners, however, did not disclose its profit numbers.
Among its investment banking rivals, Weisel ranks 22nd among investment banks in IPO underwriting, with five lead-managed deals worth $213 million to its credit, according to
Thomson/First Call Securities Data
. The firm has co-managed 45 additional IPOs that raised almost $4 billion so far this year.