As major Wall Street investment trim their municipal bond staffs amid a sharp contraction in new issuance, minority- and woman-owned firms are looking to pick up muni professionals at bargain prices.

"We are looking to attract more talent, particularly in the Northeast," said Carolie R. Smith, president of Smith Mitchell Investment Group Inc. in Seattle. "We're looking at those firms that are consolidating."

Although minority- and woman-owned firms have seen their share of the municipal underwriting business grow during the past decade, their market share is still meager.

But by turning the industry-wide downsizing to their own advantage, these firms hope to attract the type of top-flight talent that can help them capture a bigger piece of the pie.

In the first nine months of this year, minority- and woman-owned firms served as senior managers on 98 issues totaling $1.3 billion, or 1.1% of the total market volume, according to Securities Data Co. That's down from a 2.4% market share in the same period last year. But as recently as 1984, no minority-owned firm served as a senior manager of a tax-exempt offering of $5 million or more, according to Securities Data Co.

Indeed, many minority - and woman-owned firms are so new that they are experiencing their first brush with a significant market downturn. Through October, new issuance was off 44%. How these firms handle the current tumult will say a lot about their long-term viability, according to market players.

"The last turmoil was seven years ago on Black Monday. This is a new phenomenon with [the existence of] emerging firms," Smith said.

Smith estimated that 60% of the firm's business is concentrated in taxexempt finance. Although she believes the slowdown in issuance has affected her firm, there have been no layoffs. In fact, within the last four months, the firm has added two taxable sales representatives and one taxexempt sales representative.

"Because we are a smaller firm, we've always worked lean and efficiently," Smith said.

Smith said the firm also is moving ahead with its five-year plan, which calls for expansion in the Northeast.

"We've taken a regional approach. It's not like we're everywhere all at once," Smith said.

Other firms are also in a hiring mode, albeit on a selective basis.

"We are in negotiations with someone from a major firm," said Kenneth Glover, co-chief executive officer of WR Lazard & Co.

As the market in general retrenches, WR Lazard wants to add to its staff of experienced bankers, Glover added.

What's more, the firm is attracting interest from bankers who are now beginning to see the advantages of working for smaller firms, he said.

"A banker who works for us is not paying for the overhead of 50 other bankers who may or may not be having a good year. Our fixed costs are smaller and the experienced banker is beginning to realize the benefit of that," Glover said.

Kishor M. Parekh, first vice president at Howard Gary & Co. in Miami, said industry conditions presented an opportunity to expand. "For us it's a growth market," he said. "I think when everyone else is pulling back, that's when you should go in. If you're looking to hire some people, I think you can hire some good people at reasonable rates."

Parekh pointed out that a handful of major Wall Street investment banks account for approximately 80% of the market's underwriting business.

"If you're not part of that 80%, that's a growth market," he said.

In Atlanta, Jackson Securities Inc., armed with a multimillion dollar cash infusion from Wheat First Butcher Singer, is also looking to expand.

"The timid will ran. That creates less competition and more opportunity for the brave," said Maynard H. Jackson, chairman of the firm.

"We're in the market to hire three people" said Jackson, who is the former mayor of Atlanta, adding that he would be interested in hiring from a major firm if someone became available.

At least one investment banker, however, is wary of hiring staff in a down market.

"In times like this you have to be careful of hiring public finance bankers that are let go," said Napoleon Brandford 3d, vice chairman of Grigsby Brandford & Co. in San Francisco.

"We've had lots of inquires" Brandford said. But, he added, "Nobody is letting go of anybody who has relationships and an established client base."

Brandford said a lot of people are looking for a way station. "As soon as there's an upturn in the market, they'll go to another firm," he cautioned.

While it has not hired any public finance bankers this year, the firm has expanded into derivatives and asset management, hiring 10 professionals, Brandford said.

Some firms, meanwhile, are willing to consider consolidation and are seeking out strategic alliances to expand their businesses.

"We're in an era that suggests the need for more consolidation between minority- and female-owned firms," Jackson said.

"If you see huge firms merging because they understand the economy of that, I think minority-owned firms should be talking to each other," he added.

Jackson said that one of his firm's long-term strategies includes a merger or acquisition, though he declined to comment further.

Smith also believes that consolidation among the smaller, minority- and woman-owned firms is a possibility.

"I've not seen it happen yet, but it makes a lot of sense. Whenever there's a contraction, consolidation is going to bring strength to the niche that you're covering," she said.

Smith said her firm is also open to the idea of a merger.

WR Lazard had several offers to merge following the unexpected death of its founder, Wardell R. Lazard, last May, Glover said. He described the tactics of some of the firm's suitors as "bottom fishing."

"The stability of our company made some of the deals impractical," Glover said.

Before Lazard's death, the firm had even considered creating a "superfirm" consisting of several minority-owned firms, "but the terms didn't work," Glover said.

Now WR Lazard wants to acquire a small asset management or investment banking firm "that would give us regional or product diversity" Glover said. "We are looking to grow our business through selected acquisitions."

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