Revolution I-banks see boon in industry turmoil

It’s perhaps an understatement to say 2008 hasn’t been a celebratory year for investment banks. Over the past six months, the five largest have either filed for bankruptcy, been sold or converted to bank holding companies. Boutiques, meanwhile, have struggled in a sluggish deal-making environment.

A few bankers, however, are looking to expand amid the industry turmoil.

Last week Memphis-based Morgan Keegan, the brokerage and investment banking arm of publicly traded Regions Financial Corp., announced it has acquired Revolution Partners, a Boston-based boutique investment bank specializing in the technology sector.

Terms of the Revolution purchase were not disclosed, but Revolution co-founder Peter Falvey, who called it “a good and fair price,” says the deal includes financial incentives for the incoming team, who will remain part of the combined company. Revolution currently has a 27-member team and specializes in M&A and private placements.

Transactions it has worked on over the past year include business management application provider NetSuite’s $31 million purchase of software-as-a-service company OpenAir, asset auction service DoveBid’s $36 million acquisition by industrial asset seller GoIndustry, and a $40 million convertible stock placement for Allegro, a software developer.

The deal is the latest of several acquisitions of industry-specialized banking firms carried out by Morgan Keegan over the past few years. Previous transactions were for Albrecht & Associates, which specializes in oil and gas, and Shattuck Hammond Partners, which has a health care focus.

Falvey says the addition of a technology specialist was a timely move in the current economic climate.

“If history tells us anything, it’s that when there’s a downturn, that’s when you make money,” says Falvey, who adds that it’s likely the technology M&A market will begin to improve in the second half of next year.

That said, M&A transactions will likely be smaller than in years past, which “could actually be a healthy thing for firms like ours that have focused on the smaller end,” he says.

The typical deal-size range for Revolution is between $30 million to $300 million. Falvey says he thinks acquirers will still be willing to pay in that range for companies with strong balance sheets and revenue, but that pre-revenue companies will no longer be able to command such prices. —Joanna Glasner