Chase HQ Expands Equity Capital Markets Banking Staff

A sign of the times or a sign of things to come?

Chase H&Q is aggressively expanding its equity capital markets operations in an effort to keep up with a record volume of equity placements. Most significantly, the San Francisco-based division of The Chase Manhattan Corp. is busy staffing a new, 10-person equity capital markets desk in New York to complement the18 professionals that compromise its West Coast operations.

“Traditionally we have managed all the business out of San Francisco. But technology is just too big, and it’s not all Silicon Valley,” said Greg Ingram, group head of Chase H&Q’s equity capital markets.

Indeed, the bank has logged almost as much IPO business in the first quarter of 2000 as it handled all of last year. Year-to-date, Chase H&Q has taken the lead or co-managed $5.2 billion worth of new business, putting it in perfect position to top the $7.9 billion that Hambrecht & Quist placed in 1999, according to Thomson Financial Securities Data. The increased exposure on the cover of prospectuses is reflective of consolidation emanating not only from a larger deal flow (120 IPOs versus 62 at this time last year) but the larger average size of high-tech offerings ($155 million versus $58.8 million).

“There’s been a significant amount consolidation within the IPO market,” Ingram said. “Rather than three-handed deals, they tend to be five-handed deals.”

Yet while the current pace of business has provided Chase H&Q with ample underwriting opportunities, the bank is falling behind when it comes to securing more lucrative lead-managed placements.

“So they lag Goldman Sachs, Morgan Stanley Dean Witter and Credit Suisse First Boston,” said one buy side source. “Frankly, what they’re concerned about is trailing the likes of DLJ and Robertson Stephens in the manager rankings.”

To be sure, the Street’s four largest investment banks Goldman, MSDW, Deutsche Banc Alex. Brown and CSFB held the keys to the lion’s share of the 2000 IPO business. The four have run the books on 62.1% of the $19.4 billion of new capital raised so far this year, leaving second-tier banks in competition for co-manager roles or a dwindling share of the remaining lead managed spots. When it comes to top billing, Chase H&Q’s current rank of 12th place leaves it outside looking in at the blockade of top-ten banks responsible for leading the syndication on 89.7% this year’s IPO business, according to TFSD.

Eye on the IPO Prize

With an eye on securing more IPO business, Chase tapped former Schroder & Co. syndicate head Edwin R. Olsen as the head of origination of its New York office. “The opportunities here are terrific,” Olsen said. “The integration has been seamless, and when you combine Chase and H&Q’s corporate reach with cross selling of products, the result is an enormous backlog.”

According to Olsen, the firm’s backlog of 85 lead or co-managed IPOs and secondaries is second-highest on the Street. Indeed, the benefit of integrating Chase Manhattan’s strengths in mergers & acquisitions, fixed income and private equity with those of its subsidiaries’ equity operations is beginning to manifest.

“The lines are beginning to be blurred,” Ingram said. “We’re really seeing some synergies across the product lines. There is something to one-stop shopping.”

To be sure, one potential key in boosting Chase H&Q’s profile as an IPO underwriter is Chase Capital Partners’ portfolio of more than 450 direct equity and mezzanine investments.

“H&Q has always been the co-underwriter of choice in technology, but not the lead underwriter,” said Shahan Soghikian, general partner at Chase Capital Partners. “That’s the leap from right to left they’re trying to make.”