Silicon Valley Bank announced Wednesday that it has entered into an agreement under which Prudential Securities Inc. will provide corporate finance services to the $3.1 billion-asset bank.
The agreement illustrates one way that smaller banks may be able to leverage themselves into the capital markets, where larger banks have full- service, in-house capabilities.
Prudential will provide Silicon Valley with a range of products including mezzanine capital, private equity placements, and merger and acquisition advice, as well as debt and equity underwriting. The pact does not include a cash transaction.
The agreement also includes having a handful of Prudential corporate finance executives on-site at Silicon Valley's Santa Clara, Calif., headquarters. Prudential will also name five equity analysts to cover industries served by the bank.
Silicon Valley executives will be sent to Prudential's New York headquarters for training on the new product line. The bank expects to triple its staff during the next year.
James E. Anderson, who was hired by Silicon Valley from CIBC Oppenheimer in January, will co-lead the partnership as executive vice president and head of corporate finance. He is joined by Jonathan Morgan, managing director of investment banking at Prudential Securities.
Mr. Anderson said the move was necessary because the bank is facing stiff competition from both commerical and investment banks aiming to tap the region's booming technology and life sciences industries.
"It was a recognition that our clients do a lot of corporate finance," Mr. Anderson said. "This partnership gives them access to capital markets."
Likewise, Prudential gains a foothold in a market already crowded with established competitors including NationsBanc Montgomery Securities, BancBoston Robertson Stephens, and Credit Suisse First Boston.
Silicon Valley also provides Prudential with an experienced player in technology. Founded in 1983, the bank has built itself into a national player in the sector by financing start-ups with unsecured loans viewed as risky by other lenders.
Because of Silicon Valley's expertise, Mr. Anderson is skeptical that the agreement may become a model for other small or regional banks.
"It could be" a model, he said. "The dilemma most of them will have is that they don't have a specific and unique market share. You really have to have some cards on your side of the table."