The last few months have been a coming out party for Barclays Capital Inc.'s recently overhauled bank M&A team in the U.S.
The outfit, which Barclays picked up when it acquired most of Lehman Brothers after the meltdown, began 2011 minus some key dealmakers who had left for a rival. Yet it will probably end the year high on Wall Street's all-important advisory league tables for U.S. bank deals, having been involved in a flurry of transactions since the summer.
The deals are broad in scope — from a high-profile merger to an under-the-radar recap of a small Wisconsin bank. Wall Street rivals that handle big and small deals should view them as a warning shot, Barclays executives say.
"We hear every week from competitors and clients that Barclays is showing up globally in places we haven't been," says Jeff Weiss, Barclays' managing director and head of global financial institutions. "Barclays today is fishing in a different pond than we traditionally did, and we are seeing success globally."
Weiss had been with Lehman since 1983 and ran its global financials group when Barclays bought most of the firm's North American operations out of bankruptcy in 2008. Whereas his old team focused almost exclusively on the top 40 stateside banks, Barclays aims to woo those giants as well as super-community banks with as little as $3 billion of assets.
It has practical and competitive reasons for going smaller. There are very few large deals happening. Barclays also sees an opening to take share from regional bank M&A specialists such as Sandler O'Neill & Partners LP and Keefe, Bruyette & Woods Inc.
Small shops tend to be more vulnerable to the downturn in M&A and trading activity. They also lack what Brad Whitman, a co-head of Barclays financial institutions M&A, describes as the back-office "horsepower" of a giant bank with a global reach. The dearth of straight-ahead bank mergers plays to Barclays' strengths, Whitman says.
"Everything is a little harder to do these days. You can't just try business as usual. Greater creativity is required to meet" clients' goals, he says. Whitman is another Lehman alum, appointed co-head of banking M&A in 2007.
Lehman was one of the inventors of some of the methods for valuing and securitizing troubled loans. That expertise won Barclays a lot of work from the government during the downturn. Most notably: it advised the Federal Deposit Insurance Corp. in its sale of the failed mortgage giant IndyMac in 2009. A knack for pricing questionable loans has been valuable in recent deals, too. Barclays helped Capital One Financial Corp. establish the $1.7 billion markdown on the mortgages it is to assume in its $9 billion agreement to buy ING Group NV's U.S. online bank. Barclays, which helped Capital One raise the money to pay back its federal aid in 2009, is one of its three co-advisors on the ING deal.
It came into play on the smaller end of the M&A spectrum, too. The family that owns Johnson Financial Group, of Racine, Wis., had considered using an asset valuation specialist to determine its capital needs. Instead, Barclays won the right to be its financial advisor and sole placement agent in part because it said it could handle all that work in-house. The family decided to invest $235 million in the bank in early November after shopping a stake to private investors.
Barclays Capital has been involved in three other notable deals since late summer that are more complicated than classic bank mergers: It advised Sterling Financial Group Inc., of Spokane, Wash., in its deal in November to pay as much as $25 million for the best parts of a small community bank in Oregon; it was one of the advisors to private equity investors that agreed to buy a minority stake in Banco Santander SA's U.S. auto lending unit for about $1 billion in October; and in September it advised Cargill Inc. in its sale of hedge fund administrator LaCross Global Fund Services to Wells Fargo & Co. Inc.
Late last year, the team lost co-head of depositories Frank S. Cicero and five other bankers to Jefferies & Co., which began aggressively building out its banking practice ahead of an expected wave in mergers.
Barclays has been gearing up for the same. Among its recent hires: Tod Perkins, a former president and chief operating officer of Chapdelaine & Co., who joined as a managing director in July; Kevin Stein, who joined as a managing director in June from FBR & Co.'s capital markets division, where he was a managing director in charge of depositories; and Jon Bernstein, who joined as a director in June from Credit Suisse. Bruce Harting, a well-known Barclays banking analysts, moved over to the investment banking team in August.
"We brought on team players," Weiss says.
The team's executives says it is counting on Barclays' global reach for an edge over domestic rivals in the coming year, in which foreign banks are expected to spin off assets while U.S. banks fret about uncertainty overseas.
Greg Kennedy, head of depository institutions in the Americas, says that every Monday it holds a video conference with its global colleagues.
"We can take that first-hand color out to our clients," he says.