Bear Stearns Cos. is shifting into high gear with efforts to attract investment banking business.
The most direct link to such opportunities are venture capitalists, who have intimate connections to the very start-up companies that will eventually need investment banking services to take them public or get them acquired.
So earlier this month, Bear Stearns hired Jerry Newman, formerly of J.P. Morgan Chase & Co., to head its venture capital coverage effort, a new post.
Though the idea is not new - J.P. Morgan and Deutsche Bank have similar operations - investment banks only infrequently hire someone specifically to court venture capitalists. Typically, investment bankers check in with venture capitalists in their specialty group as part of their overall business.
Mr. Newman, though, makes that his full-time job. He started at Bear Stearns Feb. 12 as part of the investment banking division and is based in Palo Alto, Calif. He will work with Jonathan Beck in New York, Brian Wong in Los Angeles, and Gerald Segal in Israel, and he will continue to build out the group, he said.
Investment banks, Bear Stearns included, are competing to enter late rounds of financing for venture capital companies, and they especially want to get a first crack at initial public offerings and merger and acquisition deals. They also want to sell private-client services to wealthy entrepreneurs.
Bear Stearns would not elaborate on why it decided to establish this new practice, though the company certainly has a lower profile among dealmakers than rivals like Merrill Lynch & Co., Morgan Stanley Dean Witter & Co., and Goldman Sachs Group. Mr. Newman explained that "this is an effort to integrate all the diverse Bear products."
He said that Bear Stearns approached him about leaving Morgan Chase. He took the opportunity because he "saw an incredibly strong global platform that had never really leveraged itself to the extent it could with venture capital and private equity investors." Bear Stearns' position now is similar to that of the old J.P. Morgan a couple of years ago, he said.
Mr. Newman said he began cultivating this practice in 1992 while at SG Cowen Securities Corp., after which he moved to the former J.P. Morgan & Co. Late last year, Morgan merged with Chase Manhattan Corp. Mr. Newman said he didn't leave because of any overlap after the combination.
Morgan Chase did not return phone calls seeking comment about a successor to Mr. Newman.
Increasingly, law firms, accounting firms, and investment banks are establishing such practices, according to Daniel H. Ahn, a venture capitalist at Woodside Fund in Woodside, Calif. "They want the whole ball of wax," he said. Venture capitalists are the perfect point people for attracting a wide variety of business opportunities, he added. From venture capitalists' point of view, it is a useful relationship because they can call the venture services person to connect them to the right part of the bank.
Success is another question. When it comes down to it, decisions about which investment bank is chosen usually center around the size of the bank and the types of deals it has done before, said Promod Haque at Norwest Venture Partners in Palo Alto.
For initial public offerings, "it's very much the strength of the research analyst; for M&A, it's the M&A specialist," Mr. Haque said. "That's how decisions are made in terms of which banks are picked."
Mr. Haque, who has taken about 15 companies public, said he usually introduces the entrepreneurs to corporate finance bankers and research analysts but that it is up to the management teams to choose their investment bank.