Silicon Valley Bank, whose very name recalls technology stocks boom days, is betting that another surge is ahead for the market.
The Santa Clara company announced late Thursday that its SVB Securities Inc. broker-dealer unit had agreed to buy Alliant Partners, an adviser to middle-market technology and life-sciences companies, which make up about 80% of $4.8 billion-asset Silicon Valley Banks client base.
The cash and stock deal has an initial value of $100 million, and Alliant, of Palo Alto, Calif., can get an additional $85 million at the end of the four years if it meets certain undisclosed growth and profit thresholds, the companies said. The deal is set to close in September.
While some might argue that this is the wrong time to be in the market for technology companies, Silicon Valley Bank president and chief executive officer Kenneth Wilcox thinks otherwise.
In an interview Friday, Mr. Wilcox said that acquiring Alliant would give Silicon Valley Bank access to companies that, with little chance of getting follow-up funds from venture capitalists or in the arid market for initial public offerings, are often left with two options: merge or shut down. So while we think that in any year [this acquisition] would make sense for us, these factors make 2001 ideal to be in the mergers and acquisition business for technology and life science companies that need to merge or be bought.
And, said Mr. Wilcox, the addition of Alliant would not cause Silicon Valley Bank to neglect other parts of its franchise. The company has struggled to generate deposits in recent quarters and has been focusing on that problem expanding its deposit base as well as its product offerings. In June it set up a seed-capital business to connect small investors with start-ups seeking capital, in the hope that the entrepreneurs who raise capital would deposit it with Silicon Valley.
Though Alliant would be entirely separate from the deposit and loan business, it could help Silicon Valley Bank boost deposits.
I think indirectly, it could even help to increase our deposit base, Mr. Wilcox said. We are still working diligently to increase deposits and loans.
Over the past decade Silicon Valley Banks offerings, once limited to deposits and loans, have expanded to include investment banking, private banking, and merchant banking.
We believe that this is the perfect time to carry that expansion one step further, Mr. Wilcox said.
According to Thomson Financial Securities Data, mergerand-acquisition volume has been falling, but not as much as that of initial public offerings. It says there were 4,530 mergers and acquisitions in the first half, down 31% from the first half of 2000. There were 58 IPOs, down 72%.
Alliant, a boutique firm that specializes in mergers and acquisitions, strategic financing and sales and divestitures, is to become part of SVB Securities, keep its name, and stay in Palo Alto, which is about a 15-minute drive from Santa Clara.
The purchase is to be made in four installments over four years. The first, of $30 million, is to be paid at the time the deal closes.
SVB Securities 10 mergers-and-acquisitions bankers will be integrated into Alliant or move to another part of the bank, and the Alliant deal will cause no layoffs, he said.
It looks like a reasonable deal, said Edward R. Najarian, a bank analyst at Merrill Lynch Global Securities. He said Silicon Valley structured it safely and in a way that would help to keep the Alliant partners in place.
However, Gary B. Townsend, an analyst at Friedman, Billings, Ramsey, said the deal introduces some additional lumpiness into Silicon Valleys noninterest income stream, and that will make it harder for analysts to estimate its earnings.