In a deal that illustrates the issues of control and autonomy that arise when banks acquire investment banking houses, Comerica Inc. this week announced the acquisition of W.Y. Campbell & Co.
The deal comes less than two years after Comerica's attempted acquisition of First of Michigan Capital Corp. failed because employees at the Detroit-based brokerage firm fled.
In a strange twist of fate, some of the investment bankers at Campbell are former employees of First of Michigan.
"People with an entrepreneurial spirit like Bill Campbell that had a lot of success at First of Michigan determined that they could have a lot more fun getting away from the bureaucracy of a larger organization and could be more profitable on their own," said Michael Moran, a bank analyst with Roney & Co.
But here William Y. Campbell and his group of seven investment bankers are, joining a larger organization.
The path Mr. Campbell took to the doors of Comerica shows the creative challenges commercial banks face in luring, and keeping, their talent.
"Banks have traditionally not done well in investment banking because commercial and investment bankers live at different places in the risk continuum," said Mr. Campbell.
But Mr. Campbell is confident that the particulars of the deal will give him the autonomy his team - which has a particular strength in mergers and acquisitions - needs to work effectively and expand the business.
"The biggest concern with doing something with a bank was the issue of autonomy," said Mr. Campbell. "But Comerica did something for us that made the deal work."
Mr. Campbell said he was assured of complete autonomy over investment banking operations, including the power to hire and fire people, set policies and procedures, and make decisions that affect the business on a day-to-day basis.
The fact that Comerica had given a previous acquisition, Birmingham, Mich., money manager Munder Capital Management, 51% control of operations greatly reassured Mr. Campbell and his colleagues about the potential for creating a manageable relationship with the bank.
"That is obviously a unique step for a bank to make, and it made a clear statement to us," said Mr. Campbell.
"We would want anyone we become involved with in the investment banking field to have a lot of operating autonomy," said George C. Eshelman, a Comerica executive vice president. "The business requires a lot of empowerment of the individuals who conduct the business."
Mr. Eshelman said he's not abdicating authority, though he is ceding the necessary autonomy to Mr. Campbell.
Comerica's pursuit of an investment bank reflects both a commitment to expanding available financial services and the recognition of the need to buy talent from without instead of trying to build it from within.
"Fundamentally, the business of commercial lending is different from that of investment banking, and for that reason it is tough to take people who are commercial lenders by training and experience and ask them to cut over and think and act like an investment banker," said Mr. Eshelman.
"Commercial banks are really buying the talent," said Roney & Co.'s Mr. Moran. "The assets at an investment bank go up and down the elevator each night, so retaining those assets can be the most difficult component of the equation."
Analysts said that commercial banks will have to address the kinds of problems that doomed the First of Michigan purchase as more of them try to purchase investment banks.
"Building income continues to be an ardent focus on the part of regional players," said Mr. Moran. "These types of purchases are clearly an avenue to accomplish that."