Formalizing what most investment banks have been doing informally for years, Merrill Lynch & Co. Inc. last week unveiled a new venture banking group that will scout out potential underwriting and M&A opportunities up to two years before such liquidity events are even contemplated.
Rather than simply adding extra venture investment capacity in the pursuit of added deal flow, however, the new organization will look to partner with established venture firms in order to gain access to their portfolio companies. Some co-investment may occur, but the primary motivation is to learn more about potential customers, offer advice and introduce certain emerging technology companies to Merrill Lynch’s IT team for potential collaborations. Thus far, the firm has already begun working with New Enterprise Associates and Kleiner Perkins Caufield & Byers.
“The overwhelming goal of the group is to increase Merrill’s share of venture-backed IPOs and venture-backed M&A transactions,” said David Williams, director of the new group and head of its Asian venture banking activities.
Williams rejoined Merrill Lynch where he had previously founded its emerging markets Internet investment practice – following a nine month stint running Asian investments for Draper Fisher Jurvetson’s (DFJ) ePlanet vehicle. He said that the split was mutual and that Merrill had signed on DFJ as a partner in the new venture.
“The main reason I decided to move back to banking was that the environment in Asia was one that could best be categorized by declining asset values throughout 2000 leading to a decline in actual transactions being closed, although the flow of potential deals held up well,” he said. “Also, I had lived in Asia for four years and decided I didn’t want to stay the five or six more years it would have taken to create a [diversified] portfolio in this new environment.”
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