Last October, Silicon Valley Bank acquired Alliant Partners, an advisory company that specializes in technology and life sciences companies — a gamble in a market where the memory of the dot-com implosion was still fresh.
Today, Silicon Valley executives say their wager is paying off, though other commercial banking companies, such as FleetBoston Financial Corp., whose Robertson Stephens Inc. has a similar focus, are pulling back.
But Silicon Valley is in an unusual position. The Santa Clara, Calif., company, which has $4.1 billion of assets, specializes in providing traditional banking services to technology and life-science companies, which make up about 80% of its clients. Owning Alliant gives it investment banking services to cross-sell to those customers.
Alliant has not positioned itself to compete toe to toe with the major investment banking houses. Instead it is focusing on deals of $10 million to $150 million.
“This one [Silicon Valley Bank and Alliant] is going to work because we have the same culture and we have the same clients,” said Jim Kochman, one of Silicon’s eight managing directors, in a late-June interview.
Mr. Kochman attributes Alliant’s success in the first half, when 18 merger and acquisition deals on which it advised were announced, to the virtual identity of its target audience and the bank’s.
The deal referrals that Alliant got from the venture capital community in the early to mid-1990s dried up later in the decade because most of the funded companies were going public, Mr. Kochman said. But now, with few initial public offerings being underwritten, venture capitalists are turning to M&A as a way to liquidate their investments — and Silicon Valley Bank “has incredibly deep relationships with venture people,” Mr. Kochman said.
Alliant is not immune to broader market forces; its fee-based revenue dropped 20% last year. “M&A activity is not going to be great this year,” said Evan Momios, an analyst at Standard & Poor’s. That could hurt Alliant, he said.
Silicon Valley Bancshares is to announce second-quarter results next week. Joe Morford, an analyst at Royal Bank of Canada’s RBC Capital Markets, said he expects it to post higher revenues for Alliant.
The cultures of the two operations are blending well, Mr. Morford said.
Mr. Kochman said the deal is working mainly because “the culture of the bank is very complementary to the Alliant culture.
“It’s not a situation where one of the big commercial banks gets into the M&A business but is fundamentally missing the synergies because they are dealing with different clients,” he said.
That was a problem for FleetBoston, which attempted to cross-sell its banking capabilities with the investment banking offerings of Robertson Stephens. Fleet, whose predecessor firm BankBoston Corp. bought Robertson in 1998, is divesting it in a management buyout, having failed to find an outside buyer.
Silicon Valley avoided some rough spots by keeping the bank and Alliant separate. They retain independent identities, office space, and compensation plans, Mr. Kochman said.
The combination is going so well that Alliant is planning to broaden its geographic reach as soon as the economy bounces back, he said. It will expand incrementally, using Silicon Valley’s offices in cities such as Austin, Seattle, Boston, San Diego, and Boulder as starting points, he said.
“You’ll find us doing that within the next several months,” Mr. Kochman said.
