Less than two months after the merger of Fleet Financial Group and BankBoston Corp., the northeastern giant created by the deal is unleashing one of its acquisition prizes: the West Coast equities specialist Robertson Stephens.
Not that FleetBoston Financial Corp. is planning to sell the investment bank. Rather, the $185 billion-asset banking company has decided to take an even more hands-off approach to Robertson Stephens than the firm's previous string of parent companies, to avoid stifling the unit.
Though FleetBoston is looking for ways to cross-sell its equity and debt expertise, it has drawn clear lines between the investment bank, which competes with the bulge-bracket Wall Street firms for deals in the booming high-tech market, and the rest of its corporate banking practice.
"We're still quite independent," said Robert L. Emery, president and co-head of Robertson Stephens, in an interview in New York last week.
That autonomy has been maintained by separate reporting lines, and reinforced psychologically by a decision to drop any mention of the parent company from San Francisco-based Robertson Stephens' name.
The company has placed responsibility for fixed-income activities firmly in its Boston headquarters, under the leadership of Tim Conway, the former head of investment banking at Fleet's investment bank and broker-dealer, Fleet Securities Inc.
The reporting lines are in parallel: Mr. Conway, as well as Mr. Emery and Robertson Stephens chief executive Michael McCaffery, all report to FleetBoston vice chairman Paul Hogan in Boston.
In many ways this is an extension of the strategy BankBoston took when it bought Robertson Stephens in August 1998, though that company put its mark on the firm by renaming it BancBoston Robertson Stephens.
FleetBoston's moves are an effort to dodge the problems that have arisen in some similar deals. When NationsBank Corp. bought San Francisco competitor Montgomery Securities in 1997, for example, the bank's tight control over its acquisition was one of the reasons Montgomery chief executive Thomas Weisel and 100 bankers left to set up a rival firm a few doors away from Montgomery.
"Fleet doesn't want to kill the goose that laid the golden egg," said Andrew Collins, an analyst at ING Barings in New York. "[The bank] saw what happened with Bank of America's acquisition of Montgomery and decided it didn't want to make the same mistakes," he said.
Robertson Stephens said the parent company intends for the investment bank to maintain its focus on emerging companies in its core sectors: technology, life sciences and health care, and consumer businesses.
"We're not migrating towards industries that don't have the growth characteristics of our core businesses, such as the energy or transportation sector, where Fleet may have corporate banking relationships," Mr. Emery said.
Instead, it is expanding in key areas such as the Internet, adding analysts to cover newer businesses such as Web-based retail companies, and working with its parent in areas where both have strengths, such as media and real estate.
The strategy seems to be working so far. For the first nine months of 1999, Robertson Stephens lead-managed 41 common stock issues in the U.S. market that were worth $2.9 billion, a 71% increase in volume from all of 1998, according to Thomson Financial Securities data. For the first three quarters of 1999 it was the 10th-ranked underwriter of U.S. initial public offerings.
Some of its success in protecting its original strengths may be the result of hard-won experience. In its first relationship with a commercial bank owner, the former BankAmerica, Robertson Stephens struggled with a relationship some viewed as awkward. When BankAmerica merged with NationsBank, which owned rival investment bank Montgomery Securities, in September 1998, it decided to sell the Robertson unit, providing the investment bank a graceful exit from that deal. The buyer was BankBoston, whose merger with the former Fleet Financial Group closed in October.
Mr. Conway says the separation between the debt and equity capital-raising parts of the bank seem to be working. "I think people agreed that the right strategy for FleetBoston was to have Robertson Stephens flourish in its focused strategy of growth, with selective extensions to areas of the commercial bank," he said.
Over 50% of FleetBoston's corporate debt clients and Robertson Stephens' equities and advisory clients are in the same lines of business and are of similar sizes.
Mr. Emery said, "There's no strategic imperative to create a 100% correlation between the equity-oriented business and the debt oriented business."
Some cross-selling of high-yield bonds and other credit products to Robertson Stephens clients is already happening.
In November, FleetBoston co-managed a $500 million high-yield bond offering for Exodus Communications, a Santa Clara-based client of Robertson Stephens, sources said.
And in a reverse situation, Robertson Stephens co-managed a $370 million initial public offering in August for a longtime banking client of both Fleet and BankBoston, Fairchild Semiconductor International Inc. of Maine.
Mr. Emery and Mr. Conway said they expect much more deal flow from each other's customers next year.
"Many of Robertson Stephens' customers that have done IPOs are still relying on equity, rather than debt, financing," Mr. Conway said. "As these young companies grow, we expect them to do more debt raising next year," he said.
FleetBoston, meanwhile, is trying to shore up its leveraged finance group, which has had a few departures since the merger was announced. In October the team's co-head, Neal Reiner, left for Bain Capital. Last month two of its high-yield analysts left to join UBS AG's Warburg Dillon Reed unit.